What Is the Cutoff for a Jumbo Mortgage in Illinois?
- In every county in Illinois, the cutoff before you have to get a jumbo loan on a single-family home is $417,000. The limit for a two-unit residence is $533,850. For a three-unit dwelling it is $645,300; and it is $801,950 for a four-unit residence. Once the loan amount surpasses those levels, you are in jumbo mortgage territory. For a single-family home, a mortgage for more than $650,000 is called a super jumbo loan.
- Lenders regard jumbo loans as riskier than conventional loans. This is because Fannie Mae and Freddie Mac, government-sponsored enterprises, buy most of the mortgages lenders make in the U.S. They cannot buy loans for more than $417,000. Therefore, lenders making mortgages for higher amounts must sell them to investors or financial institutions, or keep them on their own books. Lenders sell mortgages to third parties in order to get money to loan for new mortgages.
- Jumbo loans also increase the lender's risk. Bigger loans have higher payments, increasing the chance of home buyer default. In addition, if the lender must foreclose, it could be difficult to sell an expensive home at a price that would cover the investment.
- Fannie Mae and Freddie Mac set the loan limits. The limits listed here have an expiration date of Sept. 30, 2011. Although rates have not changed since September, 2006, they are likely to move lower on October 1, 2011. The cutoff for a jumbo loan will be lowered in many counties, forcing buyers of higher-priced homes to pay jumbo interest rates for homes that were formerly priced below the jumbo cutoff. The last time these rates changed was 2006, when skyrocketing housing prices during the housing boom years eliminated home buyers in many areas from getting conventional loan rates.
- Homes in Hawaii are among the most expensive in the U.S.Jupiterimages/Photos.com/Getty Images
In states and territories where housing is extraordinarily expensive, the limits for a jumbo loan are much higher. In Hawaii, Alaska, the U.S. Virgin Islands and Guam, both the conventional and high-cost limits are 50 percent higher than in the rest of the U.S. Whether these caps will be lowered in October has not yet been made public.
