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Home Buyer's Recession Survival Guide - Jumbo Isn't As Huge As He Once Was

Updated on May 26, 2009

A jumbo mortgage is currently acknowledged in the lower 48 states as one that exceeds $417,000. These limits are set by that lovely couple of Freddie Mac and his lovely wife Fannie Mae (FHLMC & FNMA, the two largest secondary market lenders). You know them... they're the nice couple that required a few bucks to bail them out of a tight spot a few months ago... anyway... any mortgage over this limit is not going to be covered by Freddie or Fannie who buy the bulk of all the residential mortgages in the country.

If you live in Alaska, Hawaii, Guam, or some other places your Jumbo is not one that exceeds $417,000 but $650,000, and given the recent collapse in property prices in Hawaii, for instance, that is certainly an amount of money that can purchase you some really nice residential real estate! Maybe not right on the beach by Diamond Head, but certainly a stunning home on the islands!

When a loan is over this limit, which is a very different situation than it would have been just a year or so ago, then banks and insurance companies have to take over Freddie and Fannie's job. They charge a bit more than the Government couple would have, along the lines of half a point, but they make it possible for the loan to happen.

Any loan that is over $650,000 is called a Super Jumbo and can go up well into the millions. Given the fact that in some parts of New York, California, etc. the average house price is still several million dollars, even after the subprime meltdown, you can understand why there is such an important need for this sort of service.

Jumbos are rarely if ever available as no money down loans. They will require an absolute minimum of 5% down, and if more is available then the rate can come down a bit to compensate for that factor. Fixed Jumbos are also rare to find, as due to the size of the loan, the lender wants to protect their margins in case rates rise.

Due to the fact that what were once middle class houses in average cities and suburbs have risen in price so astoundingly, the number of Jumbos and Super Jumbos have been growing exponentially in recent years. The new mortgages are being granted either 40 or 50 year terms, or even interest only options, to keep the monthly payments somewhere in the neighborhood of affordable.

There are various ways to avoid PMI on Jumbos and Super Jumbos, usually by taking out a second mortgage at a higher rate to make up the equity shortfall. Jumbos are also difficult to refinance since the closing costs tend to be quite a bit higher than conventional loans. Jumbos also have their own very special characteristics and quirks and if you are looking for a mortgage in this range you should seek out a Jumbo or Super Jumbo specialist, as your regular garden variety mortgage broker may find that they can't be much help at all.

Read The Entire Survival Guide

Home Buyer's Recession Survival Guide - The Subprime Meltdown
Home Buyer's Recession Survival Guide - The Advantage Of Renting Over Buying
Home Buyer's Recession Survival Guide - Why Rent? Why Not?
Home Buyer's Recession Survival Guide - Five Common Mistakes House Buyers Make
Home Buyer's Recession Survival Guide - Get Your Home Sold Quickly & At Your Asking Price
Home Buyer's Recession Survival Guide - Improve Your Home's Value And Sell It For More!
Home Buyer's Recession Survival Guide - Learn The Value Of Curb Appeal
Home Buyer's Recession Survival Guide - Home Staging: Valid Selling Technique Or Fraud?
Home Buyer's Recession Survival Guide - Before You Go House Shopping
Home Buyer's Recession Survival Guide - The Home Condition Checklist
Home Buyer's Recession Survival Guide - Getting A Mortgage From Different Types Of Lenders
Home Buyer's Recession Survival Guide - What To Do After You're Turned Down
Home Buyer's Recession Survival Guide - New Initiatives To Help Get You Approved
Home Buyer's Recession Survival Guide - Isn't HUD An Old Paul Newman Movie?
Home Buyer's Recession Survival Guide - Jumbo Isn't As Huge As He Once Was
Home Buyer's Recession Survival Guide - FHA Q&A
Home Buyer's Recession Survival Guide - The FHA's Credit Requirements Vs. The Bank's
Home Buyer's Recession Survival Guide - Your Credit Score And Your Mortgage
Home Buyer's Recession Survival Guide - Credit Score Confusion
Home Buyer's Recession Survival Guide - Keeping That Credit Score Nice & High
Home Buyer's Recession Survival Guide - Minimize The Interest Payable
Home Buyer's Recession Survival Guide - What Is PMI & Why Do I Care?
Home Buyer's Recession Survival Guide - The LIBOR-COFI-COSI Alphabet Soup
Home Buyer's Recession Survival Guide - REO: Get Rich Quick Or Just Waste Time?
Home Buyer's Recession Survival Guide - Obtaining Flipping Money
Home Buyer's Recession Survival Guide - Consider The Additional Costs
Home Buyer's Recession Survival Guide - What Is Escrow?
Home Buyer's Recession Survival Guide - Tips To Avoid Foreclosure
Home Buyer's Recession Survival Guide - The Changing Value Of Your Mortgage Dollar
Home Buyer's Recession Survival Guide - How To Ride The Interest Rate Spikes
Home Buyer's Recession Survival Guide - Can't Get A Mortgage? What A PITI!
Home Buyer's Recession Survival Guide - Calculating Your Closing Costs
Home Buyer's Recession Survival Guide - Mortgage Broker or Mortgage Banker?
Home Buyer's Recession Survival Guide - The Magic Of A Down Payment
Home Buyer's Recession Survival Guide - A Refinance Checklist
Home Buyer's Recession Survival Guide - Refinancing With Bad Credit
Home Buyer's Recession Survival Guide - The Self-Employed Mortgage Maze
Home Buyer's Recession Survival Guide - VA Loans
Home Buyer's Recession Survival Guide - Offset & Reverse Mortgages
Home Buyer's Recession Survival Guide - The Reasons To Not Buy An Offshore Retirement House
Home Buyer's Recession Survival Guide - How To Pay Less Than $500 A Month
Home Buyer's Recession Survival Guide - Five Easy And Cheap Tips To Save Big $ On Energy

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    • Shadesbreath profile image

      Shadesbreath 8 years ago from California

      I wonder if my beer expenditure could qualify for a Jumbo.

    • Hal Licino profile image
      Author

      Hal Licino 8 years ago from Toronto

      I went to the supermarket and had to take out a jumbo loan just to pay for the groceries... but then again, I eat a lot! :)

    • Shadesbreath profile image

      Shadesbreath 8 years ago from California

      Gonna be a long time before I ever have to worry about having a jumbo loan.

    • Hal Licino profile image
      Author

      Hal Licino 8 years ago from Toronto

      That's why I stated "absolute minimum", as there is always somebody somewhere who is willing to make a deal if the interest rate is usurious enough! :)

    • ocbill profile image

      ocbill 8 years ago from hopefully somewhere peaceful and nice

      5% down in high cost areas does not exist on jumbos. good informative hub nonetheless.

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