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30 Year Fixed and Jumbo Loans - The Bills.com Blog
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30 Year Fixed and Jumbo Loans
Question: What is the difference between 30-year fixed and 30-year fixed jumbo?
Answer: Your question refers to mortgage loan nomenclature, which can be confusing:
A 30 year fixed 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.
This contrasts from an ARM, which is an "adjustable rate mortgage" where the loan's interestrate 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. Since Fannie Mae and Freddie Mac are unable to fund jumbo loans, these loans usually have a higher interest rate than conforming loans.
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