What Is A Jumbo Loan

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Someone recently asked me what is a “jumbo loan” and what makes it different than getting a regular mortgage to buy a home, so here is my recap for American readers.  A jumbo loan is not simply a big mortgage, but specifically a loan that exceeds what can be guaranteed by the federal agencies, Fannie Mae and Freddie Mac.  For most areas, this has long been $417,000, but increased in 2017 to $424,000.  Loans can be substantially more in expensive urban areas.

More and more home buyers need a jumbo loan in expensive urban area where home prices have long been pricey, going up, and have rebounded since the great recession.  What this may mean for buyers who need a jumbo mortgage is that mortgage rates may be greater than a “conforming” loan and you may need a larger down payment and FICO score.

Here is a tip on how to avoid needing a jumbo loan.  To avoid needing a jumbo loan, some buyers get the maximum conventional loan and cover the rest with a second mortgage or home equity line.

Bankrate.com has a nice lookup page to find the amount for any area:  http://www.bankrate.com/finance/mortgages/new-jumbo-loan-limits-state.aspx

About John Kimball

Over the past few decades, I have experienced most of these financial issues with both mistakes and successes. I sure wish someone had told me these things when I was first starting out. So many times I have cried out, "I want a do over!" when I learned a new financial lesson or tip. I aim to pass along to you the financial insights I have gained from experience, reading, analysis, and living the financial aspects of managing, saving, investing, and spending your money. I am an analyst with a large organization and happily married with two children on their way to an expensive college, no doubt. I read numerous financial blogs, websites, newsletters, magazines, newspapers, and books to bring you the latest news, insights, tips, and lessons combined with decades of experience.

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