JUMBO HOME LOAN
A jumbo loan, also known as a jumbo mortgage, is a form of home financing for an amount that exceeds the conforming loan limits set by the Federal Housing Finance Agency (FHFA). As a result, unlike conventional mortgages, it is not eligible to be purchased, guaranteed or securitized by Fannie Mae or Freddie Mac. Designed to finance luxury properties and homes in highly competitive local real estate markets, jumbo mortgages come with unique underwriting requirements and tax implications.
While jumbo mortgages used to carry higher interest rates than conventional mortgages (because of the greater amount of money involved and because it can take longer to sell a higher-priced home if the lender must foreclose), that gap has been closing in recent years. Today, the average annual percentage rate (APR) for a jumbo mortgage is often par with conventional mortgages – and in some cases, even lower.
On the even brighter side, down payment requirements have loosened over the same time period. In the past, jumbo mortgage lenders often required home buyers to put down 30% of the residence’s purchase price, compared to 20% in conventional mortgages. Today, that figure has fallen to as low as 10-15%.