What is a jumbo loan?
A jumbo loan is known as a “non-conforming” mortgage because it is for an amount that exceeds the conforming limits regulated by Fannie Mae and Freddie Mac, two federally sponsored enterprises. Beginning in 2017, the maximum conforming jumbo loan limit will be $453,100, in most markets throughout the US. However, in high-cost housing markets where home prices are above average, the limit is $636,150. Any loan amount higher than these numbers will require jumbo financing.
The conforming loan regulations are set by Fannie Mae, the Federal National Mortgage Association, and Freddie Mac, the Federal Home Loan Mortgage Corporation. In very simple terms, Fannie Mae and Freddie Mac are government-sponsored enterprises that buy or secure mortgages from lenders like investments. This helps make more money available to lenders they can then use to provide new loans to more borrowers. The regulations they establish are designed to create fairness to borrowers by establishing uniform mortgage documents and national standards for mortgages. The limits are based on average home prices. Jumbo loans are available for new home purchases and refinancing.
Non-conforming jumbo loans are quite common. What makes them different from conforming loans is rather than meeting guidelines established by Freddie Mac and Freddie Mae, the lender sets the guidelines. These loans with a different set of guidelines, or requirements for getting one, are important because average home prices vary widely across the United States, within states, and even cities and communities.
A $424,100 house in a small town in the Midwest could be quite extravagant. But a house for the same cost in parts of California could be quite modest. Many jumbo loan borrowers need this type of mortgage to buy large, expensive homes. But for others, this loan is used by a wider range of people looking for a mortgage in a housing market where the home prices are high, well above the local or national average.
Just because the home prices on a jumbo loan are so high, that doesn’t necessarily mean the borrower is particularly wealthy. PrimeLending offers many different types of jumbo loans to meet the needs of all types of borrowers.
- We offer loans up to 95% of the home’s value that require as little as 5% down
- Fixed-rate and adjustable-rate jumbo loans are available
- Some jumbo loan programs allow down payments in the form of a gift