Jumbo Loan Rates

Find the Right Lender for Jumbo Loan Rates

Jumbo loan rates are likely to be higher than the interest rates for conforming loans. If you understand what a jumbo loan is, why the jumbo loan rates are typically higher and what negotiation points you have, you're more likely to find a better deal on jumbo loans.

Fannie Mae and Freddie Mac set the majority of the standards for the mortgage industry including the guidelines for conforming and jumbo loans. While they don't set the interest rates, their interpretation of the amount that represents the jumbo loan affects the jumbo loan rates. The cutoff is in the range of $330,000, but it varies from state to state and changes periodically. Most lenders can give you current information on the line that makes the distinction between conforming and jumbo loans, as well as Conforming Loan Rates versus jumbo loan rates.

Jumbo loan rates are typically higher than those of a conforming loan for several obvious reasons. Probably the most often reason given by lenders is the large amount of money and the potential for the lender to lose that money. Consider it in real dollar terms. A bank loans $100,000 for a conforming loan and the borrower defaults. The bank has less money tied up in this loan and the property is likely to sell again in a relatively short period of time, allowing the bank to recoup that money. But a lender who approves a half million dollar loan for a home is tying up a much larger amount of money for a single loan. It's going to take longer for the bank to recover that money even if the borrower makes every payment on time. If the borrower defaults on the loan, the lender will have lost a significantly greater amount of money and there is less demand for this kind of property so the lender may have trouble selling it.

With this in mind, you can understand why jumbo loan rates are usually higher than conforming loan rates. By proving your credit worthiness with an excellent credit report and by providing a sizable down payment, you may be able to negotiate for lower jumbo loan rates. You may also be able to make larger monthly payments to repay the loan in a shorter amount of time, also encouraging the lender to offer lower jumbo loan rates.

Remember that the majority of lenders work with conforming loans much more often than with jumbo loans and they may be reluctant to offer the best jumbo loan rates available. Find a lender who is accustomed to jumbo loans and familiar with jumbo loan rates for your best rates and terms.