After 6 years of scarcity, lenders are returning to the jumbo mortgage arena, giving U.S. homeowners access to lower rates and simpler loan guidelines.
A jumbo mortgage is a mortgage for which the loan size exceeds local conforming mortgage loan limits. Jumbo loans are specific to Fannie Mae and Freddie Mac financing. In recent years, however, the term "jumbo" has been used to describe certain "large" FHA and VA home loans as well.
Aside from loan size traits, jumbo mortgage guidelines often mimic "standard" mortgage guidelines from front-to-back including maximum debt-to-income (DTI) requirements, minimum home equity restrictions, and property type caveats.
What makes jumbo home loans different is that government-backed mortgage entities won't insure them. They are issued and managed by private lenders, a group which includes Big Banks such as Wells Fargo, JP Morgan Chase, and Bank of America as well as smaller banks and groups including US Bank.
The private-sector aspect of jumbo mortgages is why they all-but-disappeared from the market late last decade. Mortgage lenders booked big losses along with the economy and were nervous to make loans without federal backstop. This shift, in part, is why Fannie Mae, Freddie Mac and the FHA have more than 90% market share today.
With the housing market's recovery, however, jumbo lending is returning. Banks are more willing to take risk with the U.S. economy in expansion and home values rising nationwide.
Jumbo mortgage guidelines are loosening and mortgage rates are dropping.
The term "jumbo loan" is applied broadly to mortgages; not used to identify a specific mortgage loan type (which is it) as much as to identify mortgage loans of a specific size (which it is not).
Furthermore, jumbo loan limits vary by area.
For example, in Columbus, Ohio, the jumbo conforming loan limit is $417,000 but in Loudoun County, Virginia, an area in which home values are much higher than the national average, the jumbo loan limit is $625,500.
Jumbo loan limits vary by loan type, too. The jumbo limits for a conforming loan are not the same as for an FHA or VA product. These bullet points illustrate how single-family jumbo loan limits vary among three common mortgage types :
Depending on where you live, and how you finance, your jumbo limits will vary.
As private lenders return to the mortgage market, homeowners and home buyers with large loan sizes benefit.
Rates are dropping for jumbo and super-jumbo home loans, lowering the cost of homeownership and re-opening the doors to a refinance. As compared to 3 years ago, jumbo mortgage rates are down as much as 3 percentage points.
The information contained on The Mortgage Reports website is for informational purposes only and is not an advertisement for products offered by Full Beaker. The views and opinions expressed herein are those of the author and do not reflect the policy or position of Full Beaker, its officers, parent, or affiliates.
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2015 Conforming & FHA Loan Limits
Mortgage loan limits for every U.S. county,
as published by Fannie Mae & Freddie Mac, and the FHA.