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A jumbo mortgage is a loan that is above the limits set by Fannie Mae and Freddie Mac and are referred to as a non-conforming loans. The cost of a jumbo loan is slightly higher than a conforming loan since these loans are usually held by banks and lending institutions and are not traded as conforming loans can be. The home must be located in a higher-cost area, which is a neighborhood that can support a higher mortgage meaning you can’t build a million dollar home in area where homes sell for $400,000. The area must support the cost of a jumbo mortgage.
Jumbo Loan Options
Jumbo Loan can be used to purchase single-family and multi-unit dwellings up to four units. You can also use a jumbo loan on a second home or investment property. A jumbo mortgage may have a fixed 30, 20, 15 or 10 year term or an adjustable interest rate fixed for 3, 5, 7 or 10 years and then adjustable after the fixed period. If you are only planning on being in the home 7 years or selling it in that time period then a 7 year Arm may be right for you.