Jumbo Mortgages Boost Luxury Home Sales

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.