About Jumbo Mortgages
What is a Jumbo Mortgage?
A jumbo mortgage loan is a home loan in an amount in excess of the “conforming loan” limit. This limit is set by the Office of Federal Housing Enterprise Oversight (OFHEO), the regulator for both FNMA (Fannie Mae) and FHLMC (Freddie Mac), which sets the limit based upon average home prices nationwide. These government agencies purchase and securitize mortgage loans in the secondary market, creating a steady flow of capital for mortgage loans. The current conforming loans limit is $417,000 ($625,000 in Alaska, Guam, Hawaii, and the U.S. Virgin Islands).
The secondary market for jumbo loans is limited primarily to mortgage lenders themselves which are backed by lines of credit provided by Wall Street, as well as banks and large insurance companies. Because there is less of a secondary market for loans over $417,000, they tend to be somewhat more difficult to find and priced higher than conforming loans. This rate differential has ranged from .25% to 1.5% depending on the market environment.