While compliant lenders tend to work with a ratio of 45% or more, giant lenders tend to maintain 43% or less. The first mortgage represents 80% of the price of the house, the second mortgage is 10% and the down payment covers the rest of the account (another 10%). A jumbo loan is a type of mortgage that is too high to be guaranteed by Fannie Mae or Freddie Mac, which are government-sponsored companies that set mortgage underwriting rules and buy qualified loans from lenders. Homeowners who meet these requirements can refinance a giant loan to achieve any number of financial objectives, such as exchanging an adjustable-rate mortgage for a fixed-rate loan, reducing their monthly payment, canceling private mortgage insurance, or withdrawing accumulated capital from the home.
Jumbo loans are a type of conventional loan that does not meet the guidelines established by the National Federal Mortgage Association (Fannie Mae) and the Federal Mortgage Lending Corporation (Freddie Mac).