Do Jumbo Mortgages Have Higher Rates Than Conforming Loans?

Although it would seem to make sense that a larger loan inherently carries more financial risk to the lender than a smaller loan and that the interest rate would be higher as a result, jumbo loan interest rates are not very different from the rates on conforming loans, and in many cases are lower.

"Historically, jumbo loan rates were about a quarter percent higher than conforming rates," says Battany. "Higher-priced homes were susceptible to larger fluctuations in values, which meant more risk for the lender."

In today's market, however, jumbo loans can be priced as much as one-quarter percentage point lower than conforming loans.

For example, a jumbo loan for $800,000 in San Diego shows an interest rate of 4.375 percent for a 30-year fixed-rate mortgage on a $1 million purchase price. In the same ZIP code, a loan for $320,000 showed an interest rate of 4.5 percent for a 30-year fixed-rate mortgage on a $400,000 purchase price.



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