30 Year Fixed Jumbo Mortgage Definition
Need to know the 30 year fixed jumbo mortgage definition? What is a 30 Year Fixed Rate Jumbo Mortgage Loan? As the name implies, a jumbo mortgage loan is one that is bigger than a normal mortgage loan. Specifically, a jumbo loan is one where the originating principal balance exceeds the amount of a conventional conforming mortgage loan. Conforming loan limits are set by the Government Sponsored Enterprises (GSE), Fannie Mae (FNMA) and Freddie Mac (FHLMC).
Fannie Mae and Freddie Mac conforming loan limits are regulated by the Federal Finance Housing Agency (FFHC). Conforming loan limits are set by geographic area and increase on the number of units a property has; the cap rises from a 1 family residence up to a four family residence. A jumbo mortgage loan exceeds the Fannie Mae and Freddie Mac limits.
Jumbo loans were popular when house prices were rising quickly and borrowers required financing above the conforming limits. Jumbo mortgages are a higher risk for mortgage lenders and the interest rates tend to be higher than a conforming loan.
Currently, in most of the United States, the range of conforming loan limits for a single family house varies between $417,000 and $729,750 depending on you location. Higher limits are set aside for Alaska, Hawaii, Guam and the US Virgin Islands. The Fannie Mae website provides tables outlining the limits and the Federal Finance Housing Agency posts a spreadsheet in a county by county format of the current conforming loan limits.
In most cases, mortgages are repaid on a monthly basis although bi-weekly payments are available. A 30 year fixed rate jumbo mortgage paid as scheduled will have 360 equal monthly payments over the life of the loan. The interest will not vary; in the early stages of the repayment, more money will be applied to interest instead of the principal. An amortization schedule will detail the periodic (monthly) payments; the amortization run will show how much of the payment is applied to interest and to principal.
The housing market has been tumultuous and mortgage lenders have tightened the requirements for all types of mortgages. If you are considering applying for a jumbo mortgage here are some things to expect and consider:
- A down payment of 20% will be required.
- If you plan on refinancing, you will need approximately 20% equity in your property.
- Income verification and proof of the ability to make the monthly payment will be required.
- A credit check will be made to ensure you have the credit score to qualify.
- The interest rate will be somewhat higher than a conforming mortgage.
- Your closing costs may be higher.
- Jumbo mortgages come in different varieties, if you want a fixed rate loan make sure you are not being quoted an Adjustable Mortgage Rate (ARM) or other type mortgage.
- Make sure to include an amortization run in your research. Amortization calculators are available on the Internet and you can run financing models based on different interest rates, terms and the amounts to be borrowed.
Buying a home is the biggest purchase most people will make in their life. In any type of mortgage it is important to do your research and shop for the best rate. Small increments in interest rates impact your monthly payment and over a 30 year term will add up to a significant differential in cost.