Yes, jumbo mortgage rates tend to be higher than interest rates on conforming mortgages because they can't be purchased by Fannie Mae and Freddie Mac. Fewer buyers means less liquidity and higher interest rates.
Taking out a jumbo mortgage doesn't immediately mean higher interest rates. In fact, jumbo mortgage rates are often competitive and may be lower than conforming mortgage rates. It ultimately depends on the lender and the market conditions.
And lenders know they can sell their loans to these government-sponsored enterprises that promote liquidity in the home loan market. That explains why jumbo rates usually are higher: The lenders who make loans and the investors who buy them consider jumbo loans to be riskier than conforming loans.
Jumbo loans are riskier for lenders than conforming loans. They can't be backed by Fannie Mae or Freddie Mac, so lenders usually have stricter guidelines for borrowers to receive jumbo loans.
One of the reasons that the jumbo-to-conforming rate difference has declined is the increase in guarantee fees (also known as g-fees) for the loans bought by Fannie Mae and Freddie Mac for conforming and high-balance conforming loans.
Jumbo loans offer the flexibility of either a 20% down payment or a lower down payment with private mortgage insurance (PMI). That can mean significant savings upfront with various options depending on your income, credit history, budget, and other qualifying factors.
A 30-year fixed jumbo mortgage is a home loan that will be repaid over 30 years at a fixed interest rate. The amount of a jumbo mortgage will exceed the current Fannie Mae and Freddy Mac loan purchase limit of $417,000 for a single-family home, as of July 2010.
Jumbo Loan Cash-Out Refinance Requirements
These limits are as follows: If you have between 30% and 50% equity in your home, you can take out up to $300,000. If you have 50% or more equity in your home, you can take out up to $500,000. These guidelines don't apply to second homes and investment properties.
Often, you will not have to pay PMI on Jumbo loans, as they usually require a higher down payment. PMI is designed for home buyers who make low down payments. However, since the down payment requirement will vary by lender, it is possible that your lender will require PMI in exchange for a lower down payment.
The minimum credit score for a jumbo loan is typically at least 680, but some lenders may require an even higher one. The higher your credit score, the lower your interest rate is likely to be. More cash in the bank.
Jumbo loan rates
The rates on jumbo mortgages fluctuate and can be higher or lower than the conforming mortgage rate. Currently, the average 30-year jumbo APR for a home purchase is 5.780%, while the average 30-year conforming loan APR for a purchase is 5.820%, according to Bankrate's survey of mortgage lenders.
Larger Down Payment
One simple way to avoid using a jumbo mortgage is to make a bigger down payment. You only need to come up with enough money to keep the loan balance below your local conforming loan limit. With that approach, you have more options available, and you will pay less interest on a smaller loan balance.
Jumbo Loan vs.
Jumbo loans live up to their name by offering a limit much higher than that placed on conforming loans. While conforming loans are created for the average homebuyer, jumbo loans are designed for high-income earners looking to purchase more expensive properties.
A conventional loan requires a credit score of at least 620, but it's ideal to have a score of 740 or above, which could allow you to make a lower down payment, get a more attractive interest rate and save on private mortgage insurance.
About jumbo loans
A loan is considered jumbo if the amount of the mortgage exceeds loan-servicing limits set by Fannie Mae and Freddie Mac — currently $647,200 for a single-family home in all states (except Hawaii and Alaska and a few federally designated high-cost markets, where the limit is $970,800).
A 20% down payment would put you at $150,000 out of pocket — and that's before closing costs are added in. Today's homeowners have more loan options, though. Jumbo loans are now available from some mortgage lenders with as little as 5% or 10% down. Others may require 15% to 20%.
In 2021, the conforming loan limit is $548,250 in most counties in the U.S., and $822,375 in higher-cost areas. Any mortgage over these amounts is considered a jumbo loan.
A jumbo loan or 'jumbo mortgage' is any home loan that exceeds the limits for a conventional conforming loan. In 2022, a jumbo loan is a mortgage bigger than $647,200 in most areas (though loan limits are higher in more expensive counties).
At a 4% fixed interest rate, your monthly mortgage payment on a 30-year mortgage might total $4,774.15 a month, while a 15-year might cost $7,396.88 a month.
Any loan that exceeds $970,800 is considered a jumbo loan. Individual counties such as Solano County and San Joaquin county have lower jumbo loan limits.
Jumbo loans don't take more or less time to approve as compared to other loan types. Most mortgage lenders can close a jumbo loan in 3 weeks or fewer.
Jumbo loans are typically available with either a fixed interest rate or an adjustable rate, and they come with a variety of terms.
Jumbo mortgages are used to purchase properties with steep price tags—often those that run into the millions of dollars. Conventional mortgages, on the other hand, are smaller and more in line with the needs of the average homebuyer.
For 2022, the Federal Housing Finance Agency raised the maximum conforming loan limit for a single-family property from $548,250 (in 2021) to $647,200. In certain high-cost areas, the ceiling for conforming mortgage limits is 150% of that limit, or $970,800 for 2022.