Jumbo mortgages are loans for amounts higher then limits set by Fannie Mae and Freddie Mac. Fannie Mae and Freddie Mac are charted by the Federal government to supply financing for mortgage lenders. This limit set for conventional mortgage lending is $417.000 in 2006 for a single family home in the mainland United States. If you had been avoiding refinancing your mortgage because you were over the conforming limit, now is the time to refinance with a traditional mortgage.
Non-conforming or “jumbo” mortgages have higher interest rates than traditional mortgage loans because there is more risk for the lender. The 2006 limit for conforming mortgages is significantly higher then in previous years. The state of the housing market is to blame; however, homeowners with a jumbo mortgage stand to save a lot of money by qualifying for traditional financing under the new limits.
There are expenses involved with refinancing. You will need to stay in your home long enough to recoup these expenses in order to make refinancing worth while. A general rule of thumb is to plan on staying put for at least five years to fully realize the savings from refinancing your jumbo mortgage. When you close on the new mortgage loan you will have to pay most of the same expenses you paid when applying for your original mortgage. These expenses include application fees, lender fees, legal expenses, and closing costs.
When refinancing your mortgage you will need to shop from a variety of mortgage lenders to be sure you do not overpay for these expenses. When shopping for your new mortgage, make sure you compare all aspects of the loan offers, not just the interest rates. Comparing the Good Faith Estimate from each lender will allow you to identify which is the best mortgage offer.
To learn more about shopping for the best mortgage and how to avoid common homeowner mistakes, register for our free mortgage guidebook: “Five Things You Need to Know before Refinancing Your Mortgage.”