There are two basic categories of loans for the purchase of property in the United States. The most common type of mortgage is called a conforming loan. This means that it is a mortgage loan that meets the Freddie Mac and Fannie Mae or GSE (Government- Sponsored Enterprise) requirements.
These conforming loans cannot exceed $424,100 in most areas of the country. However, in high-cost areas conforming loans can be as much as 636,150. They are called conforming loans because they conform to the loan limits and therefore can be purchased by GSEs.
For loans that are higher in value than these amounts, jumbo mortgages are put in place. Jumbo simply refers to the value of the mortgage as over loans that are conforming to the set standards. Just as conforming loans have their own interest rates, there are different jumbo mortgage interest rates that will need to be compared when choosing the best mortgage for the buyer.
The Rate Variables
All jumbo mortgage interest rates are provided based on a fixed or adjustable rate, which is similar in process to the conforming loan rates. However, because of the challenge of selling these loans outside of GSEs, the rates are typically slightly higher.
In addition to higher jumbo mortgage interest rates, buyers are typically required to put down a larger percentage as the down payment. Additionally, issues such as income verification are typically more involved with these types of loans as there is more risk for the lender.
Choosing a jumbo mortgage is a good option for the purchase of a dream home or to avoid choosing a starter home and then upgrading in a couple of years. While not all lenders will offer these loans, they are a good option for anyone with the income and the down payment required.
To learn more about current jumbo mortgage interest rates and loan options, talk to the experts at Guaranteed Rate.
