What Are Jumbo Loan Rates

The jumbo loan, referred to as a non-conforming loan, is a commercial or residential mortgage loan that is set higher than the conforming limit of Fannie Mae and Freddie Mac. Jumbo loans can be more expensive than traditional loans in terms of fees, interest rates, and the cost to refinance. The Fannie Mae and Freddie Mac are government sponsored mortgage entities. They set the limit each year for what the “regular” loan limits are, and anything above that number is considered a jumbo loan. The current conforming limit is $417,000. Fannie Mae and Freddie Mac categorized certain parts of the country as high cost areas and increased the limit above $417,000 in them. The maximum loan amount is fifty percent higher in Guam, Alaska, the Virgin Islands, and Hawaii.

Jumbo loan rates can be variable and fixed interest ones. Fixed rates are more popular in the United States, and most mortgages come with 15- and 30-year terms. In addition, there are 10-year, 20-year, and 40-year terms. The rate adjusts with variable rate mortgages, based on some index. If, for example, you plan to live in your home for no more than five years, you may consider a three year jumbo variable rate mortgage. The creditor may offer a low introductory rate that will be effective over the first 3 years. Once this period is over, jumbo loan rates begin to adjust based on the index’s rate and the loan’s margin. In has been found out that 5-year jumbo loan rates are equally aggressive. It is important, however, to ask about the loan’s adjustment intervals, caps, and margins before you move forwards. With 10-year adjustable jumbo loan rates, the loan comes with a lower rate over a period of 10 years. Once it is over, the rate begins to adjust. Still, most clients will rather choose the security of an interest rate that is fixed for 120 months, compared to the 12 – 82 months which are featured with the 1 – 7 year programs.

A 30-year fixed mortgage will be a good solution for borrowers who plan to live in their property for many years, and prefer consistent mortgage payments, with no increase in payments. The monthly payments will be based on the amortized interest over the loan term, the principal loan amount, and the interest rate. The actual payment varies depending on the current interest rates when the borrower applies and his/ her financial situation. With some creditors, the loan may be paid at any time, and no pre-payment penalties apply. Moreover, the primary home’s value may be refinanced up to 95 percent.

The major disadvantage of the jumbo home loan is that the lender will most likely charge you a higher interest rate. In fact, there are no rules on what the jumbo loan rates can be set at. If a creditor aims to enlarge their jumbo loan portfolio, it can decrease the rates and makes them the same as those of a Fannie Mae loan. On the same day, a different creditor may decide to reduce its portfolio of jumbo loans, raising the rates accordingly. To make sure you are dealing with a trustworthy creditor, it is best to check their rating with the Better Business Bureau. Those with A+ are safe to deal with.