Why are Jumbo Mortgage Rates higher than Traditional Mortgages? |
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Answer:
If you’re buying a home that costs more than In some housing markets across the nation, jumbo mortgages are practically the norm due to increased home values. The two secondary mortgage markets – Fannie Mae and Freddie Mac – establish the dollar amount that characterizes a jumbo home loan. This dollar amount is subject to change, but often remains the same for several years. While jumbo mortgages make it possible for home buyers to purchase an expensive home, this mortgage type involves a higher interest rate. Freddie Mac and Fannie Mae purchase a large bulk of mortgage loans. In turn, they resell these loans to private investors or lenders. Traditional home loans are easier to resell. On the other hand, jumbo loans are more difficult because there are fewer buyers. As a result, residential mortgage lenders have to charge higher interest rates on jumbo loans. This way, the lender can make a profit. Unfortunately, a higher rate on the mortgage loan equals a higher monthly payment for the home buyer. Trackback(0)
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