Understanding Super Jumbo Loans Rates

Taylor | Apr 6, 2010 |

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If you are someone looking to purchase a home and take out a loan for more than $650,000 then you have probably come across the term 'Super Jumbo Loan' quite frequently-and you probably have become very confused as to what that term means exactly. There is a very good reason for this, and that is the definition for super jumbo loans varies according to not only where you are looking to purchase the home, but also according to the lender who is making the loan. In this article, we will discuss the basics of jumbo loans, the rates, and what all of this mean for you as a home buyer.

Definitions of Jumbo and Super Jumbo Loans

A jumbo loan is simply defined as a loan made in an amount great than $417,000. A super jumbo loan is a loan for an amount greater than $650,000. However, the confusing part begins with the fact that these numbers/limits will actually vary according to where you live and which lender you are talking to. With jumbos, the limits can increase in what are called 'high cost areas', and areas outside the continental United States (Hawaii, Alaska, Puerto Rico, Virgin Islands). For super jumbo's, the limit will increase for high cost areas, but also according to the lender. Some lenders define 'supers' as over $1 million dollars, but most do sitck with the $650,000 limits.

What This Means for You

So, how does this affect you, as a home buyer? It affects you in terms of the interst rates that you will pay on your loan. Conforming loans (loans that are for amounts under the above limits, i.e. less than $417,000) are subsidized quite a bit by the government, with the goal of making housing more affordable to middle class america. Because of such a subsidy, jumbo loans are usually about 50 bps higher than conforming loans, and super jumbo loans are between 75 - 300 bps higher.

What You Can Do

So, what can you do if you are stuck in a super jumbo loan? Well, with super jumbos it is a little more difficult. One traditional method is to pay down the loan so you owe less than $417,000 and then refinance the loan into a conforming loan. However, that requires quite a large payment and may not be an option right now. One thing that can be done, however, is to put as large of a down payment as possible. This will decrease the amount of risk the bank is taking on your loan, and as such will help them offer you a lower interst rate.