Jumbo loans (also referred to as “Jumbo Mortgages”), are home loans which by definition are larger than most. What qualifies this type of loan as a jumbo loan is they exceed the “conforming limit’, which is the maximum loan amount that Fannie Mae and Freddie Mac will purchase. Plenty of lenders offer jumbo mortgages now, although the requirements tend to be stricter than most. While the conforming limit will tend to vary by location, in most housing markets, it is set to $417,000, and any mortgage larger than that will be considered jumbo.
In other more expensive areas, for example Los Angeles, any home loan of more than $729,750 would be considered jumbo. These conforming limits are set by the Office of Federal Housing Enterprise Oversight (OFHEO), and because the institutions that securitize these loans don’t have the guarantee of Fannie Mae or Freddie Mac, the yield premiums are normally higher than conventional loans.
To qualify for this type of loan you should expect to:
- Make a down payment of 20 percent or greater or alternatively obtain a minimum of 20% equity
- Document your source of income
- Receive an adjustable-rate loan, because fixed-rate jumbo loans are relatively rare.
- Have your monthly mortgage payment equal no more than 38 percent of your income (before taxes are applied).
Some examples of the purposes for Jumbo Loans include:
- The purchase of condominiums
- The purchase of 1-4 family residences
- Jumbo Loans maybe additionally be used to finance primary residences, second homes and investment property (depending on lender guidelines).
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