30 Year Fixed and Jumbo Loans

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READER QUESTION

What is the difference between 30-year fixed and 30-year fixed jumbo?

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Bills.com Resident Expert
Dec 12, 2011
BILL'S ANSWER

Your question refers to mortgage loan terminology, which can be confusing:

A 30-year fixed rate loan is a loan where the principal is repaid over a 30 year period and the interest rate your lender charges is fixed for the life of the loan. The typical 30-year fixed rate loan is fully amortized, which means that a portion of each monthly payment goes towards interest and the rest goes towards principal reduction.

This contrasts with an ARM, which is an "adjustable rate mortgage" where the loan's interest rate is fixed for a short period of time and then readjusts for the remaining term of the loan to an adjustable market rate. If rates go down, you benefit, but if rates go up your rate will increase and your monthly payment could rise.

Jumbo refers to the size of the loan. A Jumbo Mortgage is a mortgage with a loan amount above conventional loan limits. Jumbo Mortgages apply when agency limits don't cover the full loan amount. Fannie Mae (FNMA) and Freddie Mac (FHLMC) are large agencies that purchase the bulk of residential mortgages in the U.S. They set a limit on the maximum dollar value of any mortgage which they will purchase from an individual lender. A loan amount greater than this limit (currently $417,000 for a single family home in the contiguous states) is considered a Jumbo loan. Some counties in specific states have higher conforming loan limits (above $417,000) called "High Balance" conforming or "Super" conforming. The highest Super conforming limit is currently $729,750.

Since Fannie Mae and Freddie Mac will not purchase non-conforming loans, these jumbo loan products usually have a higher interest rate and are only offered by certain boutique or private lenders.

Bills.com makes it easy to compare mortgage offers and different loan types. Please visit the Loans page and find a loan that meets your needs.

Best,

Bill

bills.com

Comments (7)


Avatar
Paul T.
Lodi, CA  |  December 08, 2010
I have a 30 yr fixed jumbo loan. the first 10 years is intrest only. if i pay an extra 500 a month toward the principle, why wouldnt that lower my amortized payment at the end of the 10 year intrest only?
Avatar
Bills.com
December 09, 2010
Review the loan contract you signed. If the contract is structured in the manner you suggest, then you got what you wanted when you signed the contract. Mortgage contracts I have seen, however, apply any amount paid over the monthly amount to the principal, which reduces the number of payments necessary to retire the loan.
Avatar
Bills.com
June 15, 2009
You should confirm the facts with your lender. There is not enough information in your question and I do not want to take a guess.
Avatar
Anabel .
June 13, 2009
I have a 30 year mortgage with PMI conventional fixed. I am unable to understand the lingo. Base, I guess was 3.50% ajustable with a 3 year pre-penalty. The cap is 9% and I am still lost. I end the 3 years arm now in July. My queston is what hapens next? is my loan going up or staying fixed. Thank you,
Avatar
Bills.com
June 03, 2009
In the United States, a jumbo mortgage is a mortgage with a loan amount above the industry-standard definition of conventional conforming loan limits. This standard is set by the two largest secondary market lenders, Fannie Mae and Freddie Mac. Loans above the conforming limits may be offered by seller servicers of these wholesale institutions, as well as Wall Street conduits who provide warehouse financing for mortgage lenders. The loan amounts reflect average loan sizes nationwide. Jumbo mortgages apply when agency (FNMA and FHLMC) limits don't cover the full loan amount. Fannie Mae (FNMA) and Freddie Mac (FHLMC) are large agencies that purchase the bulk of residential mortgages in the U.S. They set a limit on the maximum dollar value of any mortgage they will purchase from an individual lender. As of 2006, the limit is $417,000, or $625,500 in Alaska, Hawaii, Guam, and the U.S. Virgin Islands. Other large investors, such as insurance companies and banks, step in to fill the need, with maximum mortgage amounts going to the $1 million or $2 million range. A loan in excess of $650,000 is referred to as a super jumbo mortgage. The average interest rates on jumbo mortgages are typically greater than is normal for conforming mortgages, and vary depending on property types and mortgage amount.
Avatar
Lori R.
Clawson, MI  |  April 02, 2011
I don't understand why this is a jumbo still? Her amount was for 124,000.
Avatar
Dolli W.
June 03, 2009
My loan is a 30 year jumbo. My home was $124,000. Can you explain why it is called a jumbo?
Thanks for your feedback!

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