Jumbo Mortgage: What is It and is it Ideal for Me?

Mortgage Loan in BaltimoreA jumbo loan, likewise called a jumbo mortgage or non-conforming mortgage, is basically a type of home financing that surpasses the FHFA or Federal Housing Finance Agency’s conforming loan limits. In turn, not like conventional loans, jumbo loans can’t be bought, securitized or guaranteed by Freddie Mac or Fannie Mae. Developed for financing more high-end properties in more competitive property markets, jumbo loans come with different tax implications and underwriting requirements.

How “Jumbo” is a Jumbo Loan Exactly?

Primary Residential Mortgage, Inc. notes that the answer to this question will differ from one county and state to another as set by the FHFA. For example, this 2017, the FHA set a maximum limit of $424,100 for one-unit properties, for the majority of states, says a mortgage broker in Baltimore. This essentially means that presently, a home loan that’s higher than $424,100 would be considered a jumbo mortgage in most states. However, this loan limit would be higher in other states with more costly property prices, such that in one of the high-cost areas, a mortgage is considered a jumbo mortgage if it exceeds $636,150.

For a clearer breakdown, there are about 3,134 counties across the U.S. and out of these counties, 2,916 have a conforming loan limit of only $424,100, while 108 counties follow the $636,150 limit. These counties include San Francisco, Los Angeles, and New York. Most of these high-cost zones are located in California because it is home to the majority of the most luxurious housing markets in the whole country.

There are likewise 115 counties with limits that exceed $424,100, but are lower than $636,150, such as in Baltimore, Maryland wherein the limit is $517,500. On the other hand, conforming loan limits are typically higher in states outside the continental United States. Five counties in Hawaii for example, have loan limits between $721,050 and $636,150.

Should You Consider a Jumbo Loan?

Although the interest rates on jumbo mortgages are almost close to that of conventional home loans, it’s still best that you do your own due diligence and compare loan products that might be right up your alley. For instance, you might find that taking out two conforming mortgages with lower limits might be more appropriate for your financial conditions instead of a jumbo mortgage.