Many of Orion’s brokers offer jumbo loans to clients. And Orion has some very good high balance and jumbo products. But what exactly is a jumbo loan? With pricing and programs all over the map, we thought it was a good time for a refresher.

Real estate prices are increasing rapidly all over the nation, and many potential homebuyers are being told by brokers, “You will need a jumbo loan for financing.” Jumbo is a generic termfor a mortgage that is over the Fannie Mae/Freddie Mac maximum loan limit. If your borrower needs to borrow more than the maximum loan limit to purchase a home or refinance a current home, they will need “jumbo” financing.

The primary factor that makes jumbo loans different from conforming loans is that there is not a standardized secondary market where the mortgages are bought and sold. Orion’s brokers know that conforming loans are funded by a lender, packaged with many other loans into a bundle and that bundle of mortgages is sold to either Fannie or Freddie. Fannie and Freddie then package the mortgages they purchase from lenders across the country into bigger bundles and sell them on the open market as a mortgage-backed security (MBS).

Jumbo loans are funded through mortgage banks, and then retained by the bank that funded the mortgage, or sold to investors. Investors in jumbo mortgages can be other banks, credit unions, equity funds or insurance companies. There is a myriad of jumbo programs offered by Orion, each with different guidelines for underwriting, and different rates. Typically, the stricter the guidelines the lower the rates.

Orion’s AEs know our jumbo offerings. Some jumbo programs have looser guidelines than Fannie or Freddie have with their high-balance programs. This type of underwriting guideline trade off is important as many jumbo programs have a minimum loan amount that is one-dollar higher than the conforming loan amount. During the pandemic, many jumbo investors pulled out, or pulled back with higher interest rates. Not Orion!

For many of our broker’s clients and situations a jumbo loan product may be a better value than a high-balance conforming mortgage. While many jumbo guidelines are very close to conforming guidelines for much of the underwriting, there are differences that need to be considered such as required reserves or qualifying income. Having a detailed conversation with an Orion AE regarding your borrower’s financial situation and what their mortgage needs are will be a big help to them and you.

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