A jumbo mortgage is a mortgage loan in an amount above conventional conforming loan limits. This standard is set by the two government – sponsored enterprises Fannie Mae and Freddie Mac, and sets the limit on the maximum value of any individual mortgage they will purchase from a lender. The current loan amount for a jumbo loan is $729,750.00. Any loan amount above this is considered a jumbo loan. This loan limit will change in September 2011 to $625,000.00. At that time any loan limit above $625,000.00 will be consider a jumbo loan. The average interest rates on jumbo mortgages are typically higher than conforming mortgages.
Jumbo mortgage loans are a higher risk for lenders. This is because if a jumbo mortgage loan defaults, it may be harder to sell a luxury residence quickly for full price. Luxury prices are more vulnerable to market highs and lows in some cases. That is one reason lenders require a higher down payment from buyers of higher end properties. Jumbo home prices can be more subjective and not as easily sold to a mainstream borrower, therefore many lenders may require two appraisals on a jumbo mortgage loan.
