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Understanding Jumbo Mortgages

By: 1st american mortgage

In simplest terms, jumbo mortgages are loans taken to buy expensive real estate that exceeds loan standards for average homes.

How is the amount of a jumbo load determined?

What distinguishes jumbo mortgages is the loan amount. Currently, loan amounts greater than $417,000 are generally considered jumbo mortgages. This determination is made by comparing industry standards for average housing loans as governed by the two biggest secondary mortgage lenders, Fannie Mae and Freddie Mac.

Fannie Mae and Freddie Mac set industry standards for 'conforming loans'; Home loans beyond those maximums are regarded as jumbo mortgages. These two agencies cap the dollar figure for loans that they will buy (that's where the $417,000 figure comes from). Larger loans are funded by a variety of other investors, like insurance companies and banks. Note that the dollar figure set to qualify jumbo mortgages differs by locale, so the cap is higher for jumbo mortgages in Hawaii and Alaska (and a few others). In most of the United States, jumbo mortgages are those larger than $417K.

Available Terms - 15 Year Fixed, 30 Year Fixed, or Variable 30 Year Jumbo Mortgage

The terms for jumbo mortgages vary similarly to other types of housing loans. Buyers can choose between variable rates, like 3/1 or 5/1 ARMs, for a 15-30 year jumbo mortgage, or a 15 or 30 year fixed jumbo mortgage

Whether a 15 or 30 year fixed jumbo mortgage or an adjustable rate is best for you depends on your future plans and current situation.

A 30 year fixed jumbo mortgage is better for those who plan to own the home for a very long time. With this type of mortgage, the rate will not go up but it will never go down, either - a 30 year fixed jumbo mortgage stays the same throughout the life of the loan. This is good because the payment is predictable, and cannot rise sharply if interest rates do. On the downside, the 30 year fixed jumbo mortgage rate is higher because the lender knows they can never get more than the original rate.

The lowest jumbo mortgage rate is usually an adjustable 30 year jumbo mortgage rate. Lenders understand their potential to benefit from increases in rates over time, so are willing to lend at a smaller margin in the beginning. However the lower rate won't last forever. A variable 30 year jumbo mortgage rate will be fixed for 3 to 5 years, and then will adjust annually according to an index. Even small increases could mean significantly larger monthly mortgage payments.

Going with an adjustable 30 year jumbo mortgage rate works well when a buyer plans to move within the 3 to 5 year fixed period. For buyers that are interested in smaller initial ayments, or who will probably refinance early on, the variable rate is more advantageous than the 30 year fixed jumbo mortgage Why pay the higher 30 year fixed jumbo mortgage rate when the buyer knows this isn’t their long-term plan?

All jumbo mortgage products - 15 year, variable 30 year, or the 30 year fixed jumbo mortgage - can be beneficial. A trustworthy mortgage lender with experience financing jumbo mortgages is a buyer's best source of advice on which product to choose.

Article Source: http://www.gcyarticles.com

This article is written by J.B. of 1st American Mortgage and Loan, LLC, a Colorado mortgage lender who offers access to information on obtaining a Colorado mortgage loan as well as other information on loans inColorado online mortgage quotes, and rates through his website TrueMortgageQuote.com www.truemortgagequote.com).

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