One of the most common questions we get about jumbo mortgage loans is – “What is the difference between a regular mortgage and a jumbo mortgage?” Simply put is the difference is with how much you need to borrow. As of 2006 if you need to borrow more then $417,000 for a home, you now have a jumbo mortgage. It is important to note that the cut off of $417,000 is set by Fannie Mae and Freddie Mac – not by individual brokers. Additionally as a result of the larger amount of money being borrowed, interest rates on jumbo mortgages are typically higher.
Common Jumbo Mortgage Loans
- 3/1 jumbo arm- A 3/1 jumbo ARM is an adjustable-rate mortgage, that has an initial interest rate for the first three years and then changes annually thereafter, based on an index.
- 5/1 jumbo arm- A 5/1 jumbo ARM is an adjustable-rate mortgage, or ARM, that has an initial interest rate for the first five years, and which changes annually thereafter, based on an index.
- 15 year fixed rate jumbo mortgage- A 15-year jumbo mortgage is a home loan that exceeds the limits set by Fannie Mae and Freddie Mac and is set for the term of 15 years.
- 30 year fixed rate jumbo mortgage- A 30-year jumbo mortgage is a home loan that exceeds the limits set by Fannie Mae and Freddie Mac and is set for the term of 30 years.
- Interest Only Jumbo Loans – Similar to a 30 year fixed mortgage, the only difference being that for the first 1-10 years you have the option to pay only the interest on the loan.
Because of the recent increase in home values, jumbo mortgage have started to increase in popularity. The good thing about that is most lenders and mortgage brokers can now handle jumbo mortgage loans; the disadvantage comes with higher interest rates. Typically the difference between a regular mortgage loan and a jumbo mortgage loan is around 1/2 %.
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