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A jumbo mortgage is a home loan that exceeds the limits set by Fannie Mae and Freddie Mac.

How is the amount of a jumbo load determined?
What distinguishes jumbo mortgages is the loan amount. Currently, loan amounts greater than $417,000 are usually deemed jumbo mortgages. This determination is made by comparing industry standards for average housing loans as governed by the two biggest secondary mortgage lenders, Fannie Mae and Freddie Mac.

Fannie Mae and Freddie Mac set industry standards for ‘conforming loans’; home loans exceeding those limits are considered jumbo mortgages. These two agencies cap the dollar figure for loans that they will buy (that’s where the $417,000 figure comes from). Larger loan amounts are funded by other investors such as banks and insurance companies. Note that the dollar figure set to qualify jumbo mortgages differs by locale, so the limit is higher in Hawaii and Alaska (and a couple other states). In the majority of the U.S., jumbo mortgages are those larger than $417K.

Best Terms - 30 Year Fixed Jumbo Mortgage Rate, 15 Year, or Variable 30 Year Jumbo Mortgage

Similar to other housing loan types, the terms for jumbo loans vary. Buyers can choose between variable rates, like 3/1 or 5/1 ARMs, for a 15-30 year jumbo mortgage, or a 15 or 30 year fixed jumbo mortgage rate.

Whether a 15 or 30 year fixed jumbo mortgage or an adjustable rate is best for you will depend on your plans and situation.

A 30 year fixed jumbo mortgage is preferable for people who plan to own the home a long time. With this type of mortgage, the rate will not go up but it will never go down, either - it stays the same for the life of the loan. This is good because the payment is predictable, and cannot rise sharply if interest rates do. Conversely, the 30 year fixed jumbo mortgage rate is higher because the lender knows they can never get more than the original rate.

An Adjustable 30 year jumbo mortgage rate is usually the lowest. Lenders know they have the potential of benefiting from interest rate increases over time, so are willing to lend at a smaller margin in the beginning. Although, the lower rate won’t last. A variable 30 year jumbo mortgage rate will be fixed for 3 to 5 years, and then will adjust annually according to an index. Even small increases could mean significantly larger monthly mortgage payments.

Choosing an adjustable rate is good when a buyer plans to move within the 3 to 5 year fixed period. For a buyer more concerned with smaller initial payments, or who will likely refinance in the near future, the variable rate is more advantageous than the 30 year fixed jumbo mortgage. Why pay the higher 30 year fixed jumbo mortgage rate when it doesn’t fit in with the buyer’s long-term plans?

All jumbo mortgage products - 15 year, variable 30 year, or the 30 year fixed jumbo mortgage - have their advantages. A dependable mortgage lender with experience financing jumbo mortgages is a buyer’s greatest resource for advice on which product is appropriate for them.

Article Source: ABC Article Directory

This article is written by J.B. of 1st American Mortgage and Loan, LLC, a Colorado mortgage company who offers customers access to information on obtaining a mortgage loan in Denver, and other information about getting a home mortgage in Colorado through his website TrueMortgageQuote.com (www.truemortgagequote.com).

In order to discuss and understand what NOT to do when you are refinancing your mortgage, we should first cover some basics about mortgages, refinancing, and the reasons why a person would want to refinance in the first place.

In terms of the actual nature of a mortgage, there is very little difference between a mortgage and a loan except that a mortgage is always for a home, it is generally paid back over a longer period (5-40 years), and the home itself is used as collateral. Because the real estate that you are buying is used as collateral, this is what is referred to as a ’secure loan.’

When a borrower (you) and a lender (usually the bank) agree upon the terms and time frame of the mortgage, one of the most important things that is in question is the Interest Rate (usually cited as an APR percentage, meaning annual percentage rate). This determines how much the borrower will eventually pay back to the lender.

There is a very simple concept that has been practiced for centuries that is at the heart of an interest rate. If Party A lends money to Party B, and Party B agrees to pay back that money at a later date, Party B will always pay back MORE than the total amount borrowed simply because they had the use of that money over the specific arranged timeframe.

When it comes to refinancing a home loan or mortgage, many people have heard of it and know they can save money this way, but might not know exactly how to do it. When you decide to refinance your home loan, you will work with a different bank or lender that will purchasing the remaining amount of your existing mortgage and provide you with a new one, and you will instead make monthly payments to this new bank.

Although the majority of families looking to refinance their mortgage wish to do so to take advantage of lower interest rates, a few other reasons would be to raise a lump-sum of cash, or to secure against possible volatility in their interest rate values. This last reason, preventing the possible raising of interest rates, usually amounts to switching from an adjustable rate mortgage (ARM) to one with a fixed interest rate.

When a borrower wishes to refinance their mortgage to obtain immediate cash, this is called ‘Cash-Out Refinancing,’ and many people make costly mistakes in this process which you will learn to prevent below.

—–Mistakes To Avoid With Cash-Out Refinancing—-

Cash-out refinancing is borrowing more than the total cost of your home in order to have a chunk of cash left over after you have repaid your existing mortgage.

If you are looking to get some cash to work with using a mortgage, this simply means that you are getting a loan based on the value of your home, with the home itself as collateral. You have to options when it comes to getting cash this way, and the one that you should use depends on what interest rates you are able to secure with each. You can either obtain a second mortgage for the value of the amount of cash that you need, or you can let your new bank know that you need the value of your new mortgage to be HIGHER than the value of your existing one.

Now when most people hear about taking a second mortgage out, their brain tells them that they must avoid this at all costs as it may put them further in debt. But this is not always right, because usually with cash-out refinancing the bank or lender will charge you a higher interest rate than if the value of your new mortgage was THE SAME as your old one.

For the sake of ease and simplicity, let’s just use some basic round numbers in this example: The existing value to be repaid on your mortgage is $200K, and you need $20K cash for something like a hospital bill (or maybe a generous donation to your Tropical Vacation trust fund). You can either obtain a $20K second mortgage at 12% interest, or you can refinance your existing mortgage to $220K at 7%.

Which one is better? The reason most people would say that overall refinancing would be better in this situation is because they are scared off by the higher interest rate number, and they are conditioned to believe that a taking a second mortgage means you are in financial trouble. However, the total amount of interest that you would eventually repay on this smaller second morgage is far less than what you would repay for the larger refinanced mortgage.

—-A Common Mistake When Refinancing For Lower Interest Rates—-

Everybody should agree that it makes sense to refinance your mortgage if you are able to secure a lower interest rate, but at what point does this strategy become profitable?

When most people go about trying to find the answer to this question, the two things that they compare are only their current interest rate and the interest rate they will get if they refinance. The one thing that they will often forget, and the thing that you now know to take into account, is the COST that the new bank or lending institution will charge for the refinancing.

Depending on the bank, the current prevailing interest rate, and the amount of the mortgage, this cost can sometimes be large to the point that it will actually negate the money that you save from the lower interest rate!

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Alot of people and families end up paying more money than they should every month simply because they do not know how to refinance their home mortgage in the right way. Go to YourRefinancingSolution.com to learn the mortgage refinancing secrets that your lender will never tell you.