Discovering Where to Go For Jumbo Mortgage Loans

While the federal government is feverishly trying to loosen the grip lenders have on credit markets, there is one home loan product that is getting much costlier and harder to obtain, namely the jumbo mortgage (non-conforming mortgage).

A jumbo mortgage loan is a product that is more than the conventional "conforming" loan maximum limit of $729,750 established by government companies, Fannie Mae and Freddie Mac. Jumbo loan interest rates have generally been higher than conforming loan rates throughout their time, in main part because they are considered riskier without a guarantee that Fannie Mae and Freddie Mac will purchase the loan.

Nowadays, homeowners and mortgage companies claim the gap has been widening, pinning some homeowners to accept riskier variable rate loans, or ARMs. In addition, just to be eligible for and become approved for jumbo home loans has become hard work.

In the past few years, these non-conforming loans were easily accessible, but currently the guidelines to become approved are much stricter. Persons with yearly incomes up to around a quarter of a million dollars have easy mortgage programs insured by the FHA, while the borrowers considered to be affluent can get financing from private banking companies.

For the people with household incomes between $250,000 and $500,000, mortgages are not simple at all. These are the type of people who dwell in areas where entry residences could be approaching $1 million.

And in high-cost areas  and states like New York City, Northern New Jersey, California, Florida and other parts of the country, Fannie Mae and Freddie Mac will only allow maximum loans of $729,500. For mortgage loans greater than this, mortgage brokers and bankers must locate different investors who want to accept the risk with these loans.

Jumbo home loans are still out there, but currently they come with strict qualifications. They are offered by a few banks and a few investors that mortgage brokers have access to. In the heydays, people qualified for jumbo loans with 5-percent down and two-to- six months of reserves. In today's market, they must have a minimum of six month's liquid cash reserves (or 25% of the loan amount in cash reserves/savings when the requested amount is greater than $1 million dollars), a 740 credit report score and a down payment of at least 20 percent for full documentation. for stated income, count on 30% on the low-end and 40-to-50 percent as common place.


The interest rate difference with jumbo and conventional loans is currently around 1.5 percent, compared with being a percentage point or less in July 2008. Just the past week, the average 30-year fixed-rate jumbos loan was in the mid-6 range.  The going interest rate on a conventional loan was averaging around 5 and a third percent, according to Freddie Mac.