When you’re looking for a mortgage loan of an amount that is over the limit for what Fannie Mae and Freddie Mac call a "conforming" loan, you may find credit hard to come by.
When you’re looking for a mortgage loan, if the amount you need is over the limit for what Fannie Mae and Freddie Mac call a “conforming” loan, you may find credit hard to come by. For most parts of the country, anything over $417,000 is a non-conforming or jumbo loan, although the limit goes up to $729,750 in some high-cost areas. Because a lender can’t get the loan off its books by selling it to one of the government-backed mortgage buyers, a jumbo loan generally comes with higher rates and stiffer lending standards than a conforming loan.
There are signs, however, that the market for jumbo loans may be loosening up. Several lenders, fueled by an influx of cash as investors head away from stocks into safer havens like CDs and money-market accounts, are lowering interest rates on jumbo loans to around the 6% range. That’s half a percentage point lower than the average 6.5% rate on jumbo loans and almost two percentage points lower than the recent high of 7.9% reached last October.
Don’t expect getting a jumbo mortgage to be a walk in the park, however. There are a number of standards you may have to measure up to, including a credit score of 720 or more and six months of cash reserves in the bank. Down payments in the 20% to 25% range are another likely requirement and those seeking a jumbo refinance mortgage will probably need to have a 20% equity stake in the home. Mortgage experts advise borrowers to shop carefully among several lenders for the best deals.