| By :
Paul Wise
A jumbo mortgage is a loan for an amount greater than normal loan limits. Limits on Jumbo mortgages are set by Fannie Mae and Freddie Mac and are changed every few months. These mortgages are called "Jumbo" because they are too large for these companies to purchase. Today, jumbo mortgages are in excess of about $400,000 in the U.S. Jumbo Mortgage Interest Rates vary. Because of the economic stimulus packages this limit has been raised or lowered a few times in the last years. It now seems like Banks in the U.S. are starting to show interest in jumbo mortgages again as the year (2009) comes to a close. Large banks can actually afford offering those loans to their customers in with attractive Jumbo Mortgage Interest rates since in the last year more and more people pulled out their money out of the "risky" stock market / bonds and put it in long-term CD's or bank security - what made it possible for the banks to lend out large amounts of money; of course by keeping only a fraction of these deposits in reserve (as cash and other highly liquid assets) and lend out the remainder. When taking a loan this big, it is a lot more complicated for the lender to just sell the property and pay the loan (trying to minimize his losses) in case the loan defaults - what drives lenders to try and get a down payment higher than they would with a regular mortgage. For buyers, there are some restrictions usually placed on jumbo mortgages - the main one is the difficulty to get insurance on the loan. If you do get it insured - you'll pay way more than you would pay for regular-mortgage insurance. Because of the extra risk, lenders would usually make you buy a PMI (Private Mortgage Insurance), which is safer for them, but more expensive for you. Lenders would usually charge higher interest on jumbo mortgages as well. this recent move by the banks made jumbo mortgages available to more people, it is not that simple to get one - you will need a high income and a good credit score to be approved' and probably a relatively high down payment. With all requirements, restrictions and the limits changing every now and then, when you finally find a jumbo mortgage you qualify for - compare it to a regular mortgage; you will probably find no big differences between the two.
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