What Is a Jumbo Mortgage?

The jumbo mortgage is a loan for an amount that exceeds the industry average for mortgages. Following is a basic introduction to jumbo mortgages.

Jumbo Mortgages

Jumbo mortgages, as their name implies, are very large loans. Currently (as of May 2010), in the majority of US, any mortgage that is above $417,000 is considered a jumbo loan. If you are in Hawaii, Alaska, Guam, or the US Virgin Islands, the amount jumps up to $625,500.

Risk

A jumbo mortgage is considered riskier than a traditional mortgage. Because of this, you are going to have to meet credit criteria that are stricter than for a traditional mortgage. You will have to demonstrate that you have sufficient income to pay for this type of loan, and you will need a very high credit score.

Interest

With this type of loan, you should expect to pay a higher rate of interest than you would with a normal mortgage. In most cases, the interest rate is going to be about .5% higher than what a traditional mortgage's rate is. Because of this, some individuals choose to get two different loans so that they can split up the amount that they are borrowing and avoid the high interest.

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