Difference between jumbo loan Colorado and conforming mortgage Colorado

Posted by AmandaTom on April 17th, 2013

In the United States it is not difficult to buy a home when you have enough to make a small down payment. There are enough lenders out there that try to attract prospective borrowers with the most attractive mortgage options. It is a highly competitive market and the lenders fight tooth and nail to keep the interest rates at a bare minimum so that they can attract customers. Depending on the amount of loan you require you will be offered a jumbo loan Colorado or a conforming mortgage Colorado. What is the difference between the two? Not much but there are differences.

The difference between a jumbo loan Colorado and a conforming mortgage Colorado is all about the size of the loan. For all practical purposes if the loan amount you are looking at is more than $417,000 then you take a jumbo loan and if it is below this amount you take a conforming loan.

Fannie Mae and Freddie Mac are two government appointed agencies that buy most of the mortgages in the country. These two companies are also authorized to set the standards for mortgage loans in the USA. They are the ones that decided on the amount of $417,000 above which any loan is considered a jumbo loan.

If you consider the general terms and conditions there is no difference between a jumbo loan Colorado and a conforming mortgage Colorado. You pay the same monthly installments and the tenure of both the loans give you the same options. However, there are two critical differences between these two loans that you need to bear in mind.

The first difference between a jumbo loan and a conforming loan is in the rate of interest. Since a jumbo loan is larger in size the risk taken by the lender is also more. Hence, the rate of interest in a jumbo loan is slightly higher than a conforming loan. On an average you find a difference in interest rates between 0.25% and 0.50%.

The other difference between a jumbo loan Colorado and a conforming mortgage Colorado is in the down payment amount. For a conforming loan you can make a down payment of 10% of the property value. For but for jumbo loan the minimum down payment is 20% of the property value. If you are looking at refinancing then you should have at least 20% equity in the property.

Now that you know the differences between these two loans it may be easier for you to choose your property and hence, the loan. The difference in interest may look small but it can create quite a difference in the overall amount paid because of the size of a jumbo loan. And you also need to be sure that you have the capability of paying the monthly installments over a long period of time, 30 years in some cases.

Choose a financer than can help you choose between a jumbo loan Colorado and a conforming mortgage Colorado and this will help you in the long run.

Depending upon the amount of loan you require you will need to choose between a conforming mortgage Colorado or jumbo loan Colorado.