When a Loan Becomes a Jumbo Loan

By Debbie Wilson
Loan Page Columnist

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In its most basic form, a jumbo loan, also known as a non-conforming loan, is a residential or commercial mortgage that does not conform to the guidelines set by Fannie Mae (the Federal National Mortgage Association) or Freddie Mac (the Federal Home Loan Mortgage Corporation). That is because the loan exceeds both the limit (approximately $417,000) and guidelines that these two government-sponsored mortgage entities set for purchasing these jumbo loans from mortgage originators, due to their high risk.


Advantages of a Jumbo Loan

In today's high-priced real estate market, homes in the $400,000 range are more common than rare. As a way of getting around the higher interest rates, many mortgage lenders will break up the loan into two smaller, separate loans. This not only helps provide you with a lower interest rate, but it also enables you to finance your primary residence, vacation home, or investment property in markets with high real estate values.

Additionally, many jumbo loans offer some other very attractive features, including fast closings, no points, no P.M.I., no lender fees, and even interest-only new home loan mortgages. These features can go a long way when trying to stretch the almighty mortgage dollar.

Disadvantages of a Jumbo Loan

Unfortunately, many starter homes have left buyers in a state of sticker shock. In fact, loans over $650,000 have been designated as super-jumbo loans. Due to their high risk, both jumbo and super-jumbo mortgages carry a higher interest rate than conforming loans. But, with today's interest rates being so low, a jumbo loan just might offer you the flexibility you need to afford your dream home.

If you're in the market for a new home loan, but you're worried that you can't afford your dream home, think again. With today's jumbo loans, you can put little down, get approved quickly, and be living your fantasy before you know it.

About the Author
Debbie Wilson owns and operates a lakeside resort. Her previous experience includes profitability consulting for a national healthcare company. Debbie holds a B.A. in Business Management with a minor in Physical Education.

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