Not only is the mortgage very large, but so is the interest rate. Marian Phea, a loan officer with Chase Manhattan Mortgage Corp. in Los Angeles, California, points out, a jumbo loan normally carries an extra half to three-quarters interest rate. When these two corporations buy mortgages, it results in lenders having more cash available with which to make more mortgage loans. Jumbo loans are usually put into portfolios and sold to investors who want more of a return on their money than Fannie Mae or Freddie Mac.
Jumbo loans can get even more expensive.
As the size of the loan gets bigger, the interest gets higher. While there is no way around the IRS rules, there is a way around the jumbo loan problems, at least for some of the smaller jumbo loans. To do so, the first mortgage is for 80 percent of the loan. There is a 10 percent second mortgage, coupled with a 10 percent down payment that gives you your 20 percent equity. This also works with jumbos.