Information About Jumbo Loans

Jumbo loans are typical types of mortgage in the United States that usually come with $1 billion or more.  The only fact that makes jumbo loans different from other types of loans is the huge amount. The amount for a jumbo loan is often much more than the conventional limit. As a result, the interest rates charged by the borrowers could be much higher than other conventional loans.

According to Fannie Mae and Freddie Mac, two biggest secondary market lenders in the United States, the sum for jumbo loans is far above the industry-set definition of common loan limits.

Although the loan amount may vary from one country to another, the average amount is still much more than any kind of other loans. The limit for a conventional loan is $417000 now, so a jumbo loan should be more than this.

What are the Major Types of Jumbo Loans?

Jumbo loans are basically divided into three major types: fixed rate jumbo loans, adjustable rate jumbo loans and super jumbo loans. Now let’s figure out more details about these loans one by one.

Fixed Rate Jumbo Loans – Like many other types of mortgages, jumbo loans offer fixed rate options as well. A fixed rate jumbo loan features a quite stable interest rate within certain periods of the term (the currently available fixed rate term is 30 years). During the fixed periods, the borrowers are able to pay the same amount for the debt, from the first payment to the last one. However, after 30 years, the interest rate may change and even go up. So, the fixed rate jumbo loan is best perfect for individuals who can afford higher interest rates and people who want to own the loan for a longer time.

Adjustable Rate Jumbo Loans – As the name suggests, adjustable rate jumbo loans feature a changeable interest rates.  That is, the monthly payment we need to pay ranges at different periods within the mortgage term. The best and most favorable thing of adjustable jumbo loans is: a jumbo starts off as a quite low fixed rate loan in the initial periods of the term, say 6 months, 12 months, 24 months or 120 months. Then it turns into an adjustable jumbo loan that may require very high interest rates.

Super Jumbo Loans – A super jumbo loan is quite different from the common jumbo loans. However, they are quite the same in terms of the amounts and limits of the sum. They both offer huge amounts of loans. Conventional jumbo loans are usually defined, regulated and controlled by some top secondary market lenders such as Fannie Mae and Freddie Mac. But super jumbo loans are not directly controlled by these companies. Most jumbo loan lenders also deal with super jumbo loans.

Jumbo Loans VS Conventional Loans in Terms of Interest Rates

An important fact to know between jumbo loans and conventional loans is the interest rates. Compared with our conventional loans, jumbo loans always come with higher interest rates. It is because that the sum for a jumbo loan is bigger and the risk is much higher. Generally, the interest rates for jumbo loans are between 0.25% and 0.5% higher than those conventional loans. Unfortunately, it may rise when we meet some financial turmoil or investor anxiety.

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What to Look for When Selecting Jumbo Loans?

Need huge amount of money to advance your business? Common loans may not be able to satisfy your financial needs. But there is a special mortgage that will be sure to satisfy you- jumbo loan.