What Is an Agency Jumbo Loan?
In most areas of the United States, the limit for a conventional mortgage is $417,000. Any mortgage over that limit is designated as a jumbo mortgage. A jumbo mortgage is subject to higher restrictions and rates than a conventional mortgage.
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Significance
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A jumbo mortgage is a higher risk for a lender, which hedges that risk by raising the interest rates on the loan. An agency jumbo loan is usually a designation given by the lender to a mortgage that is held in-house and not sold on the secondary market.
Function
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An agency jumbo mortgage allows a borrower to purchase a high-end home with traditional mortgage products, identical to the ones offered to conventional mortgage borrowers.
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Types
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An agency jumbo mortgage can be a fixed or variable rate loan. The term of the loan can range from 10 to 40 years, depending upon the rules of the lender.
Considerations
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Many borrowers have avoided jumbo loans by having a first mortgage in the amount of $417,000, and transferring the remaining balance to a second mortgage.
Misconceptions
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A jumbo mortgage is not designated by the same dollar amount in all areas of the United States. In high-cost areas, such as Alaska and Hawaii, the limit for conventional mortgages is $729,750.
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References
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Comments
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jmastrus
Aug 10, 2010
This is incorrect. An agency Jumbo loan IS sold on the secondary market. It is a loan that falls in between the regular conforming loan limit and the temporary increased limits implemented in 2008 to help homeowners in high-cost areas. Also, the word "conforming" refers to a loan can be sold on the secondary market. The word "conventional" refers to the type of mortgage insurance, as opposed to a government loan.
