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Jumbo mortgage loans are loans that are above the conventional or conforming limits set by the two leading industry purchasers of residential mortgages in the U.S, Fannie Mae and Freddie Mac. In 2006 the conforming limit for single-family homes purchased in United States, Puerto Rico and the District of Columbia was $417,000. The conforming loan limit of $625,000 applied to homes purchased in Alaska, Hawaii and the Virgin Islands.

In February 2008, Congress passed a law that increases the conforming amount of jumbo mortgage loans for Fannie Mae and Freddie Mac beyond the previous ceiling of $417,000. The new amount is a region specific amount of 125% of the designated median price but not to exceed 175% of the $417,000 amount, which comes to a maximum of $729,750. However, at the time of this writing, there has been slowness on the part of Fannie Mae and Freddie Mac in buying these mortgage loans at the new increased rates.

Jumbo mortgage loans pose a higher risk for lenders. This occurs because if an owner defaults on the mortgage loan it is harder to turn around and sell the luxury residence quickly for full price. Jumbo loan seekers are often required to have a higher down payment because prices for luxury homes are more vulnerable to market highs and lows. Lenders for jumbo loans often require two appraisals because prices are more subjective in this price range and are harder to sell to the traditional borrower.

Because of the higher risk to lenders, jumbo loans often come with a higher interest rate than conforming loans. In traditional times of market risk there may be a fluctuation of 0.25% and 0.5% between conforming and jumbos. In higher market risk times the difference can exceed a full percentage point.

With the ever-increasing costs of home prices, many people find conventional loan limits constricting. Jumbo mortgage loans fill an important need for those who require the high financing of a nonconforming loan. Insurance companies, banks and other large investors, often step in to fill the need for additional financing in mortgage ranges of 1 million – 2 million dollars. It is important that you have the means to handle the large monthly payments of jumbo mortgage loans and it is important to shop around for the best rates from a reputable lender. The Internet makes the shopping part easy.

The lending market place for jumbo mortgages is very competitive. In many areas of the country like California most basic homes in decent neighborhoods in urban areas almost always call for jumbo mortgage loans. With this competitive market the Internet is the best place to compare the different rates for jumbo loans among lenders. Before the Internet a face-to-face meeting with a lender was required to get the necessary information on jumbo loans. Now comparison-shopping is a mouse click away.

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