Important Things to Know about Super Jumbo Mortgages

As dads, we all want to provide for our families. A beautiful home is one way to do this. Homeownership can bring both a financial and an emotional boost to our family’s well-being. Depending on your income, where you live, and what sort of home you would like to purchase, you might need a super jumbo mortgage loan to finance the right home for your family. Mortgage loans are typically classified as follows:

  • Conventional loans: as established by Fannie Mae and Freddie Mac, the current dollar limit for a conventional mortgage is $417,000. While this grew steadily in the years prior to 2006, it has remained steady since.
  • Jumbo mortgage loans: Any loan exceeding $417,000 is considered a jumbo loan. Once regarded as the domain of the wealthy and used for luxury home purchases, jumbo loans are today a necessity for many home buyers in major metropolitan markets, even for modest middle-class houses.
  • Super jumbo mortgage loans: Although not a strictly defined category like conventional or jumbo mortgages, super jumbo mortgage loans are generally those valued at $650,000 or more. This can vary, however, based on the preferences of specific lending agencies.

As mortgage loans increase in value, interest rates go up due to the higher risks faced by the lender. While jumbo mortgages tend to be .5% to 1% higher than conventional loans, super jumbo mortgages can run another .5% to 2% higher than jumbo mortgages. While half a percent might not seem like much, on a $700,000 mortgage it can add more than $200 to your monthly payment—and more than $70,000 over the life of a 30-year fixed loan!

One issue with super jumbo loans is that the pool of potential investors or buyers of the property shrinks dramatically as its value goes up. Many people can buy a $200,000 home. Very few can afford a million dollar one.  As much as we like to think we’ll be in our new home forever—and never have to go through another move!—chances are we will move again: to a bigger house, as our family grows; to a smaller one, as our kids leave the nest; or to a new town for a new job. The potential to resell your house is always an important consideration.

Because of these challenges, super jumbo mortgages are often handled by specialized brokers. If you need a super jumbo mortgage, or currently hold one and are thinking about refinancing when interest rates are low, you will want to deal with one of these specialized brokers.