Jumbo Loans: Big Price Tag? Time for Jumbo Loans

If you are fortunate to have a well paying job or business, your income will open you up to a large loan on a property. Jumbo loans are loans that Fannie Mae (the largest loan purchaser in the U.S.) does not buy because the loan value exceeds the conforming loan limit set by the government body that oversees the housing industry. Because Fannie Mae does not buy jumbo loans, the loans must be purchased by other investors and that fact alone increases the interest rate for these loans.

Typically, jumbo loans carry a ¼ to ½ percent interest rate premium over a conforming loan, but the tough lending environment of 2008-2010 made these loans much more expensive, with premiums up to 2% higher. In addition, there may be additional requirements for jumbo loans, which may include a requirement for a larger downpayment.