[4] On November 28, 2017, the US Federal Housing Finance Agency (FHFA) announced that the ceiling loan limit for one-unit properties in most high-cost areas will be $679,650 — or 150 percent of $453,100.
Jumbo mortgage loans are a higher risk for lenders, mainly due to their larger size rather than credit quality.
[1] This is because if a jumbo mortgage loan defaults, it may be harder to sell a luxury residence quickly for full price.
While typically the spread fluctuates between 0.25 and 0.5%, at times of high investor anxiety, such as August 2007, it can exceed one and a half percentage points.
Some lenders will offer the service of an extension and consolidation agreement, so that a jumbo refinancer will not have to pay for mortgage tax again on the same principal balance.
Due to rising prices, many consumers had to take out jumbo mortgages in order to buy modest homes in big-city areas;[citation needed] this option was no longer limited to high-end luxury residences.
[7] This withdrawal from the market led to a lack of lending available to fund the purchases of expensive homes, thus putting further downward pressure on house prices and completing a vicious circle.