Jumbo Mortgage Loans are back in play! With many of the Singer Island condos selling above the FHA loan limit ($417,000), buyers had to bring cash or have creative financing to complete their purchase. This held even truer over the last few years with the housing downturn and tight lending restrictions. Even when the buyer could procure a jumbo loan, rates were exorbitant.
Jumbo mortgage loans, which sizzled during the housing market’s run-up and then fizzled spectacularly, are back with more flexible products from more lenders and interest rates that are inching ever closer to the terms offered to buyers of much less luxurious homes.
As a result, more buyers are able to consider the purchase of luxury condos, a market that has been struggling over the past several years. Nationally, the annual dollar volume of jumbo loans is on pace to be the best since 2007, and a growing field of lenders is seeking to build a customer base or cement established relationships by offering those mortgages.
What’s different today is that demand for big loans is on the rise, and lenders are eagerly stepping in at a time of recovering home prices and improved economic reports. Jumbo loan volume still pales in comparison with the market’s headier days, but there are also successful efforts to bundle and sell jumbo mortgage securities to private investors. Because of the high credit rating of their customers, lending institutions are will to carry these loans on their books if there is no private investor available.
“The jumbo market we have now was created in 2009 after the crash and is very conservatively underwritten,” said Guy Cecala, CEO and publisher of Inside Mortgage Finance. “The good news for jumbo borrowers is in terms of underwriting or choice, the market is the best it’s been in the past five years.”
As competition has risen in the jumbo loans market, Fannie Mae and Freddie Mac have been hiking fees for their standard mortgage guarantees to something closer to a market rate. These higher fees are shrinking the interest rate spread between conforming and jumbo loans, as is competition by lenders to woo high-net-worth customers. At the end of June, for example, the average interest rate for a 30-year, fixed-rate jumbo mortgage was only 0.17 percentage point higher than a conventional loan, compared with a 0.5 percentage point difference a year earlier, according to financial publisher HSH.com.
That spread had climbed as high as 1.8 percentage points in December 2008, when the average interest rates were 5.2 percent for a 30-year, fixed-rate conforming loan and 7 percent for a jumbo mortgage.
“The spread is crazy right now. It’s so close right now,” said Randy Ernst, a vice president of mortgage lending at Guaranteed Rate. “Underwriting is still tough, but (lenders) want to do the business right now.
“It’s easier than it was a year to two years ago,” agreed Eric Schuppenhauer, Chase’s head of mortgage originations.
The question now becomes “How long will the jumbo rates remain stable?” This short video from Fox Business may help answer that question.
For more information on specific condominium sales activity contact Jeannie at 561-889-6734 or email her at [email protected].
Recipients of the 2012 Ritz Carlton Residences© Singer Island Power Broker Award
Director – Master Broker Forum (Jeannie)