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Jumbo Morgage Definition: Amounts + Limits
Jumbo Morgage is a term that specifically refers to any loan amount that is above the conforming loan limit as
set each year by Fannie Mae (this is why the term is often used interchangeably with 'Non-Conforming Mortgage').
So presently this means that any loan of an amount greater than $417,000 can be considered a Jumbo Morgage.
Since Fannie Mae is the largest buyer of morgages on the 'Secondary Market' their refusal to purchase any loans above
$417,000 has a serious impact on the demand for such loans. The result is that such loans have higher interest rates
than 'conforming' loans.
This is simply because, with out Fannie Mae and Freddie Mac competing to buy these jumbo
mortgages, there is less demand for them in the secondary market. To make these investments more attractive to potential
purchasers in the secondary market the interest rates on these loans are increased.
It should also be noted that there has been some movement in the direction of increasing the conforming loan limit
to an amount well above the current $417,000. This is due to the dramatic increase in home values over the past decade.
The increase in home values has created populous regions of the country wherein prospective homeowners or borrowers
don't have any access to Government Loans or the low rates provided by Fannie Mae backed products on account of median
home values being well above the current conforming limits.
Other Important Morgage Terms
Loan Application Fee - This is the Fee paid by prospective buyer to lender when applying for a morgage.
Loan Origination Fee - This is a fee charged by a broker or lender for initiating a morgage and is usually expressed
as a percentage of the loan (i.e. percentage 'points').
Lock, Lock In or Rate Lock – The written agreement in which the lender guarantees the borrower a specified
rate, provided the mortgage closes within a given time period.
Morgage Margin - A constant “spread” (or amount) which, when added to an Index, establishes a borrower's interest
rate in an Adjustable Rate Mortgage.
Maturity – The period until the last payment is due. This is usually identical to the 'term' of the loan.
Mortgage Insurance - Insurance purchased by a borrower to cover the lender's risk on loans with a 'Loan to Value'
of greater than 80%.
MIP (Morgage Insurance Premium) - Insurance purchased by borrower to insure against default on
government morgages (FHA or VA).
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Jumbo Morgage Rates - Current Jumbo Amounts, Loan Limits & Definition
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