The average rate of a 30-year jumbo mortgage fell to 3.44 percent this week, a new record low in Bankrate’s weekly survey.
That makes jumbo, or non-conforming loans cheaper than ever if you’re required to take one out.
The reason you might be required (rather than choose) to use a jumbo mortgage has to do with how much financing your home purchase needs, but it doesn’t actually relate directly to the sale price of the property.
In most areas of the U.S., a jumbo mortgage for a single-family home loan is one valued at $510,400 or more. The low-end threshold for a jumbo mortgage jumps to $765,600 in more-expensive areas. So, regardless of the purchase price of your home, you’ll only need to use a jumbo mortgage if your down payment is not enough for your principal loan balance to be below the threshold.
There’s some good news coming in 2021 for those looking to finance in expensive areas. The Federal Housing Finance Agency said Tuesday that it’s raising the loan limits for mortgages that can be bought by Fannie Mae and Freddie Mac in 2021.
For much of the United States, the divide between conforming loans and jumbo mortgages will be $548,250. That’s a 7.4 percent increase from this year’s limit of $510,400.
Lenders usually have more stringent requirements for jumbo borrowers, not just because the loans are worth more, but because they’re also seen as more risky. That’s because lenders can’t bundle them into mortgage-backed security sales, so they usually need to stay on the bank’s books for the duration.
Falling mortgage rates over the last few weeks have somewhat defied expectations. Most experts expect rates to remain stable this week because of the holiday, but many expect them to start rising in the months ahead. Said another way: now’s the time to get a new mortgage or refinance if you haven’t recently.