Jumbo mortgage – sounds like a very strange term, doesn’t it? It may sounds strange, but it is actually a very simple concept. Jumbo mortgages are those mortgages which are for larger than normal loan amounts. Sometimes people call them “California Loans” because they are often used in California to purchase the expensive homes located there.

An average home loan is over $100,000 with $250,000 or more being considered a very large mortgage loan. Most lending institutions found they didn’t wish to take the larger risk of holding the large debts and, hence, the concept of the jumbo mortgage was developed. Today, jumbo loans are not uncommon and are reasonably easy to obtain as long as you meet the credit history and income guidelines for the amount you wish to borrow.

If you want to purchase a home in the $300,000 or more price range, you should expect to have to apply for a mortgage of the jumbo classification. Of course, you could pay a large down payment if you have the liquid funds to do so, and, thus, avoid the jumbo scenario entirely. If you are considering liquidating to avoid the jumbo mortgage, speak with your financial advisor before doing so. There are advantages and disadvantages which could affect your specific situation.

The advantage of a jumbo home mortgage is simply the large sum which the lender is willing to provide for your home purchase. The lender will, of course, have thoroughly checked your background, credit history, income, and will have studied the likelihood that your income will remain sufficient to repay the jumbo mortgage loan.

The major disadvantage of a jumbo home loan is that the lender will most likely charge you a higher interest rate than for a smaller traditional mortgage. Why? Because the risk to the lending institution is greater when lending such a large sum and their collateral is an expensive home that not just anyone could afford to buy. The lending institution doesn’t want to own houses – they loan money, and selling the house if you should default on your jumbo loan payments, isn’t nearly as easy as selling an average priced home that most families could afford. The lender has to put out a great deal of money and expects to earn money based on the risk incurred.

Your local banker may well be willing to finance your jumbo home mortgage. If, however, you learn they do not lend sums of the amount you need, do no despair. There are lenders who will help you!

There are, of course, some lenders who specialize in jumbo mortgages. They can be located by searching the Internet. Other home lenders who include jumbo mortgages in their lending base can be located with an Internet search as well.

Often Internet-based lenders will be happy to accept your loan application online and provide a very quick response as to whether or not they will approve the jumbo classed mortgage. Some online lenders provide telephone application capability if you prefer not to input your financial details regarding your jumbo mortgage request online.

If you finance your home using a jumbo mortgage at a higher than average interest rate, you can certainly pay the mortgage down to a sum that qualifies you for a non-jumbo loan and refinance. This can save you thousands and thousands in interest compared to continuing to pay the higher interest rate over the entire life of the jumbo home mortgage. Refinancing is an easy process and well worth investigation once your jumbo mortgage balance has declined significantly.