Question:

Who determines the jumbo mortgage loan amount in the U.S.?

Answer:

The jumbo mortgage loan amount is any home loan exceeding the conforming mortgage loan limits, as set by the US largest secondary market mortgage players - Freddie Mac (FHLMC) and Fannie Mae (FNMA). Those two lenders purchase standard conforming mortgages from direct lenders, thus ensuring sufficient cash flow in the mortgage market.

Any loan, exceeding conforming mortgage limit as set forth by Freddie Mac is a jumbo loan. Super jumbo loans usually exceed $1 million.

Mortgage loan limits for 2006 and 2007 were set at $417,000 for single-unit houses nationwide; $625,500 was the jumbo limit for several states with higher construction costs - Guam, Hawaii, Alaska and the Virgin Islands.

Jumbo limits have been increased for the entire 2008 - as of February 2008, the conforming home loan limit for single unit houses for any area is either

  • $417,000;
  • Or 125% of the median house cost in the area;
  • And no more than $729,750.

Residents of high cost areas, such as California and New York, could take advantage of the recent jumbo mortgage loan amount increase.

The spread between jumbos and conforming loans can reach 1 point.

Luxurious residences, purchased with jumbo and super jumbo loans, are more difficult sell if the borrower defaults. Therefore, the spread (difference) between conforming loan interest rates and jumbo interest rates can be ¼ or reach a whole point, when the market is tight.

Mortgage rates hit their lowest since 1955. Ask the home loan experts we recommend Quicken Loans how to take advantage of them.
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