What Is a Jumbo Conforming Loan?
Jumbo conforming loans are mortgages with loan amounts that fall into a gray area based on limits set for government-guaranteed home mortgages. Jumbo conforming is not an officially sanctioned mortgage term, but it conveys the idea of a conforming loan in a jumbo loan size. A jumbo conforming mortgage is more conforming than jumbo.
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Mortgage Designations
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A conforming mortgage is a loan that meets the standards to be insured and/or purchased by the government-sponsored companies Fannie Mae and Freddie Mac. A major restriction on conforming loans is the maximum size of the mortgage. Mortgage loans with initial loan amounts above the Fannie and Freddie conforming limits are called jumbo loans. The funding for jumbo loans must come from sources other than the government-sponsored programs.
Conforming Limits
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From 2006 through 2010, the national conforming limit for government-backed mortgages was $417,000. These limits are set by the Federal Housing Finance Authority -- FHFA. In 2008, laws were passed to allow higher limits on government-backed loans in high housing-cost areas. The FHFA analyzed home prices throughout the country and set higher conforming limits for areas where the $417,000 limit was below the average home price. The high-cost areas have conforming limits up to $729,250.
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Conforming Jumbo Loans
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Mortgage loans in the high-cost areas for amounts between $417,000 and the local conforming limit are sometimes referred to as jumbo conforming loans. Without the special higher limits, they would be jumbo loans. The special limits allow them to be treated and insured as conforming loans. The FHFA list of high-cost areas lists contains just over 100 counties and metropolitan areas.
Benefits of Jumbo Conforming
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Home buyers who are considering a home in an area where jumbo conforming loans are possible can save on the interest rate when compared to regular jumbo rates. The rates for jumbo conforming may still be higher than rates for true conforming loans. For example, in November 2010, Wells Fargo bank was quoting a rate of 4.50 percent for conforming loans, 4.625 percent for conforming jumbo and 4.875 percent for jumbo 30-year fixed-rate mortgages.
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References
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