A jumbo mortgages is a home loan that exceeds the limits set by Fannie Mae and Freddie Mac.


How is the amount of a jumbo load determined?


What differentiates jumbo mortgage loans is the loan amount. At present, loan amounts that are higher than $417,000 are generally considered jumbo mortgages. This classification is determined based on industry standards for average home loans as defined by the two biggest secondary mortgage lenders, Fannie Mae and Freddie Mac.


Fannie Mae and Freddie Mac set industry standards for 'conforming loans'; Home loans beyond those maximums are regarded as jumbo mortgages. These two agencies cap the dollar figure for loans that they will buy (that's where the $417,000 figure comes from). Larger loan amounts are funded by other investors such as banks and insurance companies. Note that the dollar figure set to qualify jumbo mortgages differs by locale, so the cap is higher for jumbo mortgages in Hawaii and Alaska (and in some other states). In most U.S. States, jumbo mortgages are those larger than $417K.


Best Terms - 30 Year Fixed Jumbo Mortgage Rate, 15 Year, or Variable 30 Year Jumbo Mortgage


Similar to other housing loan types, the terms for jumbo loans vary. Buyers can choose between variable rates, such as 5/1 or 3/1 Adjustable Rate Mortgages (ARM), for a 15-30 year jumbo mortgage, or a 15 or 30 year fixed jumbo mortgage
rate.


Whether a 15 or 30 year fixed jumbo mortgage or an adjustable rate is best for you will depend on your plans and situation.


A 30 year fixed jumbo mortgage is preferable for people who plan to own the home a long time. With this type of mortgage, the rate will not go up but it will never go down, either - it remains at the same rate for the duration of the loan. This is good because the payment is predictable, and cannot rise sharply if interest rates do. Conversely, the 30 year fixed jumbo mortgage rate is higher because the lender knows they can never get more than the original rate.


An Adjustable 30 year jumbo mortgage rate is usually the lowest. Lenders understand their potential to benefit from increases in rates over time, so are willing to lend at a smaller margin in the beginning. However the lower rate won't last forever. A variable 30 year jumbo mortgage rate will be fixed for 3 to 5 years, and then will adjust annually according to an index. Even small increases could mean significantly larger monthly mortgage payments.



Choosing an adjustable rate is good when a buyer plans to move within the 3 to 5 year fixed period. For buyers that are interested in smaller initial payments, or who will probably refinance early on, the variable rate is more advantageous than the 30 year fixed jumbo mortgage. Why pay the higher fixed rate when the buyer knows this isn’t their long-term plan?


Jumbo mortgage products - 15 year, variable 30 year, or the 30 year fixed jumbo mortgage - have their advantages. A dependable mortgage lender with experience financing jumbo mortgages is a buyer's best resource for determining which product is right for them.

Article Source: Understanding Jumbo Mortgages