On August 9, the average rate for a 30-year fixed-rate jumbo mortgage was 4.69% . The average rate for a 30-year fixed-rate conforming loan was 4.51 percent. The difference, 0.18 percent, is the closest the rates have been in five years. Jumbo mortgage rates are usually closer to a quarter percentage point higher than conforming loan rates. In 2008, the difference was as high as 1.8 percent. Recently, Jumbo mortgages have boosted luxury home sales.
Jumbo borrowers are those needing loans for more than $417,000 in most places or $625,500 in high-price markets. Borrowers need an excellent credit score to obtain a jumbo mortgage and generally receive a better rate for a higher score. Additionally, borrowers usually need to show more reserves set aside because the monthly payments are larger. Jumbo loans typically require a down payment of at least 20%.
Lenders are originating more and more jumbo loans. Some lenders may even offer jumbo rates lower than conforming loans. Big lenders may use jumbo loans to build relationships with high net worth customers. According to Inside Mortgage Finance, origination volume is expected to hit $220 billion by the end of the year. The terms of real estate financing are at least as important as the terms of the acquisition. Our Fort Lauderdale luxury real estate lawyers assist clients in negotiating and obtaining loan documents from the lender in attempt to achieve the best potential result.
According to the National Association of Realtors, sales of properties worth over $750,000 have considerably increased in the past year. Reuters reports that the recovery in the luxury real estate market is likely attributed to jumbo mortgages. A jumbo mortgage is riskier for lenders because a luxury residence is harder to sell in the event of a default. Generally, jumbo mortgages are for over $417,000. Jumbo mortgages were rarely found after the real estate crisis.
With the market more stable, lenders are more willing to make jumbo loans to highly qualified borrowers. These large loans are too big to qualify for purchase by federal agencies like Fannie Mae and Freddie Mac, but private secondary market investors are once again becoming interested in these higher yielding loans. Jumbo loans are being offered at interest rates that are barely higher than conventional mortgages.