How Big Is a Jumbo Loan?
Mortgages can be divided into two groups based on their size: conforming loans and jumbo loans. Jumbo loans refer to mortgages that exceed the conforming loan limit, which affects who can obtain one and how much interest will be paid.
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Size
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The size of a mortgage that classifies it as a jumbo loan varies based on where the home is located. Each year, Fannie Mae sets revised qualification limits for each area. As of 2010, jumbo mortgages start at $417,000 in most areas, but can start at up to $729,750 in areas where real estate prices are higher.
Significance
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When a mortgage is classified as a jumbo loan, it cannot be bought or guaranteed by the federal government. As a result, lenders typically have to keep these loans on their books for the entire term and cannot sell them.
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Effects
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Because jumbo loans are more difficult to move, lenders have higher standards for qualifying for these loans and require a higher down payment. In addition, these loans typically carry a higher interest rate, according to the Wall Street Journal.
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