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How do you avoid paying jumbo mortgage rates on a jumbo-sized mortgage? 

You avoid taking your mortgage to a Wall Street lender, that's how.

It's pretty simple when we break it down.

The word "jumbo" is a Wall Street-specific term for home loans larger than $417,000.  In certain "high-cost" areas, the number is $729,750. 

Lately, rates on jumbo mortgages have been terrible compared to its cousin, the conforming mortgage.  Plus, jumbo mortgages carry higher loan fees. 

The price disparity is even worse for so-called "Super Jumbo" mortgages.  A super jumbo mortgage is similar to a jumbo mortgage, but bigger.   

But the thing is, the terms "jumbo mortgage" and "super jumbo mortgage" -- these are conventions of a Wall Street-bound loan.  Just because your loan size is over $417,000 doesn't mean that you have be subject to the jumbo and super-jumbo rules. 

To avoid them, just make a choice to avoid Wall Street mortgage lenders when your loan size exceeds the local conforming loan limits.  This means bypassing your neighborhood Big Bank retail branches in favor of a niche banks that harbor no allegiance to Fannie Mae or Freddie Mac.

Finding banks like this isn't always easy, but it's worth the effort.  When a lender makes its own rules instead of following the government's, its mortgage rates tend to be lower, its downpayment requirements tend to be smaller, and its underwriting process tends to be smoother. 

These are all good things when your mortgage is greater than $417,000.

Consider these mortgage scenarios from a sampling of local banks.  Each example carries a corresponding mortgage rate in the low-to-mid 6-percent range:

• $700,000 mortgage with 20 percent down, primary residence
• $1.5 million mortgage with 30 percent down, vacation home
• $2.5 million mortgage with 30 percent down, primary residence

Now, compared to what Wall Street lenders are offering, not only are the small bank rates up to 2 percent lower, but they come without discount points, too. 

And, even still, this is giving Wall Street lenders the benefit of the doubt.  Most Big Bank lenders won't hardly touch a jumbo or super jumbo mortgage with a 10-foot pole anymore, let along underwrite and approve it.

The irony here is that wealthiest Americans often have private banking relationships with firms like Chase, Bank of America, and Citi but the banks' private banking groups are ill-equipped to handle the mortgage needs of a high net worth client anymore. 

In 2005, the banks performed admirably for their wealthy clients. Today, not so much.

Therefore, the best way to avoid paying jumbo mortgage rates on a jumbo-sized loan is to get out from the Big Bank mentality and get your mortgage funded from somewhere other than Wall Street.  Jumbo mortgage rates are expensive.  Rates at niche banks are not.

So, if you're a jumbo mortgage homeowner with a local banking relationship, consider calling your banker to schedule a meeting.  Switching into a "non-jumbo jumbo loan" should be apropos given the huge disparity in mortgage rates right now.

But, if you're a jumbo and without a local banking relationship, that's okay, too -- just call or email me.  I lend in all 50 states and work with niche banks in most all of them.  If I can't help you, I'll be sure to refer you to someone who can.

Dan Green is an active loan officer. Email or call 513-443-2020. Dan is on Twitter at @mortgagereports.