Wisconsin Jumbo Loans

If you need to purchase a home that is valued at more than $417,000, you may not be able to get a conventional mortgage. Why? Because Freddie Mac and Fannie Mae, the two agencies that purchase almost every mortgage from the issuing lender, have limits as to the amount they will purchase on any one loan.

If you live in a high cost of living area, like Los Angeles, you probably realize that the $417,000 value is not going to buy much of a home for your family. So what can you do? The answer is shop for a jumbo loan.

What Is a Jumbo Loan?

Jumbo loans are loans for properties that cost more than the Freddie Mac and Fannie Mae limits. Under this loan structure, the lender sells the first amount to one of the agencies, and sells the difference to a big investor, like an insurance company or larger bank.

Because these loans bring in additional risk and an additional buyer, they cost more. Interest rates on jumbo mortgages are typically higher than those on conventional mortgages. Still, for those who need one, a jumbo home loan may be the best choice.

Increase in 2008

Those who live in high cost of living areas will be happy to know that President Bush signed a temporary increase on this loan limit in 2008. The increase allows Fannie Mae and Freddie Mac to purchase larger loans, up to $729,750. The new limit is 125 percent of the average home price in the area, which cannot exceed $729,750. While the original increase was set to expire in 2008, it has been extended through at least 2010.

While this increase makes it simpler for buyers in high property value areas to get a loan without a jumbo loan, for some affluent buyers, this increase is not sufficient. Those looking for exclusive properties will still benefit from the services of a mortgage company offering jumbo loans.

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