In many metropolitan markets across the country a
house that costs around $400,000 is little more than a starter home.
Why is it that a mortgage in the mid-$400,000 range is considered a
Jumbo Loan?
The term "jumbo" is set by Fannie Mae and Freddie Mac,
two government sponsored mortgage companies. Each year, Fannie and
Freddie set new "conforming loan limits" for traditional
mortgages.
What is Conforming Loan Limit?
Fannie Mae and Freddie Mac purchase mortgages from
lenders for resale on the securities market. The maximum loan amount
they will purchase is referred to as the conforming loan limit.
These funds are reinvested into new mortgages, providing a steady
flow of funds for the mortgage industry.
Every January, a new conforming loan limit is set. The
2008 limit for a single family home or condominium is $417,000.
What makes a loan jumbo?
When a loan amount is higher than the conforming limit
of the lender, it becomes a Jumbo Loan. A Jumbo Loan is simply a
non-conforming loan. It will usually have a slightly higher interest
rate, but offers greater flexibility in purchasing a home.
2008 Jumbo Loan Limits:
above $417,000 for single family mortgage above
$533,850 for mortgages on two-family properties above $645,300
for mortgages on three-family properties above $801,950
for mortgages on four-family properties Note: The limit in
designated high-cost areas – Alaska, Guam, Hawaii and the U.S.
Virgin Islands – will be 50 percent higher for first mortgages.
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