The definition of a “Jumbo Mortgage” is a mortgage loan whose total amount is higher than the standard conventional limitations. Jumbo loans in Florida are merely home loans for higher-than-normal loan amounts. The gold standard requirement of the “typical” loan in the lending industry is called a “conforming, traditional” home loan; that is, a loan that complies with the secondary market companies’ traditional underwriting requirements relating to credit, income and asset verification, residential or commercial property features, etc.
A lot of lenders want to provide over and above these conforming quantities, but the larger jumbo loan in Florida translates into more risk of default for the lender. Just stated, the more the bank provides, the more it stands to lose if something fails and they need to foreclose on that residential or commercial property.
Due to the fact that the lender is taking an increase in danger with the size of the loan, they will generally charge a greater interest rate than they would on a loan that is within the “standard” loan limitations. All lending institutions vary in the premium they add for jumbo loans, but an excellent general rule is to expect to pay a rate of interest about 0.5% higher than you would for an otherwise similar conforming loan.
With traditional lending institutions, these jumbo loan amounts are set in stone, especially if they are backed by Fannie Mae or Freddie Mac. In other words, a home mortgage rate for a conventional loan could be at 6%, then the Jumbo Loan in Florida will generally be about 6.5% from the very same loan provider.