Many people have misconceptions about what jumbo loans are. When they hear or read the term "jumbo loan" the first thought that automatically comes to mind is a huge loan. More specifically, people assume that a jumbo loan is any loan over one million dollars. This is not true at all. Essentially, a jumbo loan is any residential mortgage with a loan amount exceeding the maximum conforming loan amount determined by Fannie Mae and Freddie Mac, which is currently $417,000.
Because of the higher risk that these loans carry, the rates tend to be higher than loans that have a smaller value. The amount of the conforming loan fluctuates ever year and varies from state to state in the country. In 1998, for a single family home, any loan amount over $227,150 was considered a jumbo loan. That amount for a jumbo loan has increased yearly, and in 2005, any loan amount over $359,000 is considered a jumbo loan. The loan amount for a jumbo loan has also increased for two, three, and four family homes in most states. With the rise in property sizes and values, jumbo loans are more popular and valuable.
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