The term Jumbo Mortgage is chiefly used in the United States, where it denotes a big mortgage loan that exceeds conventional conforming loan limits in size. For the year 2014, the upper limit for a conforming loan according to Government-sponsored enterprise (GSE) guidelines was $417,000 for a single-family home in continental USA. For Alaska, Hawaii, Guam, and the U.S. Virgin Islands the limit was $625,000 since those areas, on average, have higher real estate prices than continental USA.
|2014 Conventional Loan Limits for Continental USA|
|Single-Family home||Two-Family home||Three-Family home||Four-Family home||Second Loan|
Conventionally, a jumbo loan is seen as riskier for the lender than a conforming mortgage loan, and this translated into a higher interest rate and more stringent requirements before a jumbo loan is approved. Even if the borrower has excellent creditworthiness, there is still the knowledge that a high-priced property can be more difficult to sell since the market for high-priced properties is smaller. In case of a foreclosure, the lender can therefore be stuck for a long time with a property that has a high valuation but no reasonable offers from buyers.
It is very important to negotiate your Jumbo mortgage well. Use a website such as banklån-24.se to learn as much as possible about the mortgage market in your area before you start negotiating. I recommend reading as many websites as possible to prepare. The more you know the lower interest rate you can get.
It is not unusual for lenders to require two appraisals of the property before they approve a jumbo mortgage loan.
Lenders will often require a larger (percentage-wise) down-payment for a jumbo mortgage loan than for a conforming loan.
As mentioned above, the interest rate for jumbo mortgage loans has been higher than for conforming mortgage loans. Recently, the interest rates for jumbo mortgage loans has dropped significantly, sometimes to levels below the interest rates for conforming mortgage loans.
Refinancing a jumbo mortgage loan can be costly since refinance fees tend to be based on the size of the principal. With a very large principal, you get large costs.
Super Jumbo Mortgage Loan
In the United States, the largest jumbo mortgage loans are known as Super Jumbo Mortgage Loans. There is no strict rule defining what a super jumbo mortgage loan is, but at the time of writing, $650,000+ is used as a rule of thumb for residential houses. Since the limit isn’t set by any governmental agency, some lenders will see anything above $500,000 as a super jumbo mortgage loan while others apply considerably higher limits.
Super jumbo mortgage loans are considered risky for the lender for the same reasons as discussed in the section about ordinary jumbo loans. The market is smaller for high-priced properties and a high-priced property can sit for a long time before it is sold after a foreclosure, unless the seller is willing to decrease the price dramatically to attract buyers from a lower market segment.
Finding investors willing to purchase a super jumbo mortgage loan from the original lender can be difficult, and this is one of the reasons why lenders tend to be more strict when reviewing super jumbo mortgage loan applications. This is especially true for super jumbo mortgage loans that exceeds $1 million.
Due to minimal institutional investor coverage, a super jumbo mortgage loan exceeding $2 million will typically require backing from private investors before it is approved by the lending company.