We recently asked two local financial experts to explain the concept of "jumbo loans." Participants are Steve Howard, vice president/branch manager, Phoenix office of HomeStreet Home Loans, and Mark Taylor, senior mortgage loan officer, AmeriFirst Financial, Mesa.
What is a jumbo loan?
Howard: A jumbo loan exceeds the conventional loan limits for mortgages acquired by the federal government- sponsored enterprises (GSEs), Fannie Mae (FNMA) and Freddie Mac (FHLMC). The Federal National Mortgage Association (Fannie Mae) was created in 1938, and the Federal Home Loan Mortgage Corporation (Freddie Mac) in 1970, both to facilitate homeownership for Americans.
What is the new loan limit?
Taylor: Beginning Jan. 1, 2017, the Federal Housing Finance Agency (FHFA) established $424,100 as
the maximum in Arizona (and most of the country) for one-unit properties. The amount had been
Are jumbos different in different parts of the country?
Howard: Several states (among them, California, New York, Hawaii and Colorado as well as
Washington, D.C.) have counties that qualify for higher conventional loan amounts. Specified
counties are considered “high-cost” based on the median housing figures calculated by the Department of Housing and Urban Development (HUD). We do not have any high-cost counties in Arizona.
Who offers jumbo loans?
Howard: Brokers, mortgage bankers, banks and some credit unions. Loans are either a portfolio (funded and serviced by the institution who originates them) or securitized and sold to investors
Who needs these kinds of loans?
Taylor: Anyone who is buying a home for which they don’t have enough cash to put down to get a loan
under the $424,100 limit. An example would be: the Smiths are buying a $600,000 home with
$120,000 down; their new loan would be a jumbo loan of $480,000.
Are jumbo loan guidelines different from conventional loan requirements?
Howard: Jumbo guidelines are set by the institutional investors who fund these types of
transactions so they can vary from lender to lender. Often these guidelines can be more restrictive
than conventional loan requirements.
Can a combo loan help?
Howard: A combo loan allows a client to use the less restrictive conforming guidelines to obtain a first mortgage up to $424,100 coupled with a home equity line of credit for the balance required.