With home prices on the rise and as the market recovers from the mortgage crisis of 2008, more people are looking for larger mortgage amounts. The Washington Post reports that 23.5 percent of mortgage loans in 2014 were jumbo loans, and jumbo mortgages were up 9.8 percent in the first quarter of 2015.

The answer for some people may be smaller jumbo loans. Smaller jumbo loans sound like an oxymoron, like “jumbo shrimp.” The term, however, applies to loans that fall between the normal conventional loan limit, $417,000, and the traditional starting point for jumbo loans, about $625,500. The reason these loans exist is that, in certain high-cost geographic areas, the normal conforming limit set by the FHA is increased. In Florida, the 2015 conforming loan limit for Collier County is $448,500, and for Monroe County, it’s $529,000. These loans may also be called “conforming jumbo” loans, “agency” loans, or “high balance” loans because they still conform to Fannie Mae and Freddie Mac guidelines for purchase.

Different Standards

Typically, non-conforming jumbo loans (those that exceed the conforming loan limits) require higher credit scores than conforming loans and a standard 20 percent down payment. That’s because the mortgage company must keep the loan on their own books rather than sell it to Freddie Mac or Fannie Mae.

Conforming jumbos, however, can still be backed by government agencies and borrowers typically pay lower interest rates, have lower down payment requirements and have lower qualification requirements (these requirements vary from lender to lender). So a first-time home buyer in Monroe County who can choose between a conforming and non-conforming loan for $529,000 might very may well choose a conforming loan backed by the FHA with a 3.5 percent down payment, rather than a 20 percent down payment. A veteran eligible for a VA loan might choose a conforming jumbo VA loan.

Know Your Options

The differences between conforming and nonconforming jumbo mortgage loans can be complex, so it’s a good idea to research your mortgage options. At Embrace Home Loans, we are experts in jumbo mortgages and can help you understand what financing may be available to you. Please browse our website for more information, or call 407-733-6425, and we’ll answer your questions about mortgages in the Sunshine State.