QandAs: Loans

What is Jumbo Loan?

Answer:
A Jumbo Loan is a mortgage above the conforming

loan limit. The limit is set by Fannie Mae and Freddie Mac, the two corporations established by the government to buy mortgages from banks. For 2006 and 2007 the limit was $417,000 for most single family homes. So any mortgage loan over $417,000 is considered a Jumbo Loan and has different features than a standard conforming loan.

Fannie Mae and Freddie Mac buy existing conforming mortgages from lenders so they can free up funds to make new loans. The buying and selling of loans by institutions is known as the secondary mortgage market. Neither Fannie Mae nor Freddie Mac will buy jumbo loans.

Banks usually sell their jumbo loans to insurance companies and other lenders. If you are shopping for a jumbo loan, keep in mind that the interest rate is usually a quarter to a half point higher than regular or lower mortgage loans, and some lenders may not offer them at all.


	more Q&A sessions like this
	What is a Super Jumbo Mortgage? What is a Conforming Mortgage? What are the different types of Mortgages? What is a Non-Conforming Mortgage Loan? Why are Jumbo Mortgage Rates higher than Traditional Mortgages? Who is Fannie Mae and what do they do? Who is Freddie Mac? What is a 1003 Form? What is a 5/1 Jumbo ARM? What is a 7/1 Jumbo ARM?