What is a jumbo arm loan?
A jumbo ARM loan is a mortgage that does not meet the conforming loan limits set by the Federal Housing Finance Agency and has an adjustable interest rate (ARM).What Are Conforming Loan Limits?The Federal Housing Finance Agency sets conforming loan limits. These limit the size of mortgages that can be bought or secured by Fannie Mae and Freddie Mac. For most single family homes in the continental United States, the limit is $417,000 for 2009 and 2010. However, in higher cost areas limits can go as high as $729,750, according to the Wall Street Journal.Why Do Conforming Loan Limits Matter?When banks issue a loan that meets the limits, they have a guaranteed buyer of that security in Fannie Mae and Freddie Mac, in case the bank needs to free up cash before the mortgage ends. When loans are larger, banks usually must keep the loan on their books instead of being able to sell it.Effects of Jumbo LoansBecause lenders are more likely to be stuck with a jumbo loan, they charge a higher intere
