Interest Rates on Jumbo Loans
are Doing the Limbo
Buyers in the high end Luxury Home Markets are really catching a break with Interest Rates and the availability of Jumbo Financing. Lenders, Depository Banks, and Brokers are all pursuing and competing for these loans as their loan volumes have dropped (as a rule) during 2014.
Competition for these loans, paired with the cooperation of the financial markets, have resulted in a steady drop in Interest Rates on Jumbos over the recent weeks. Interest Rates, much like the bar in a Limbo Dance, have gone lower and lower. Indicators would seemingly point to Interest Rates rising ... but the opposite has actually been taking place.
Historically, Mortgage Lenders would look at using "piggy-back" financing (a first Mortgage with a simultaneous 2nd Mortgage) to keep Borrowers away from higher Interest Rates in the Jumbo Home Loan Market. But that's not the case currently.
With that said though, there ARE exceptions to the rule ... and those cases where Jumbo Loan Guidelines are more restrictive. (That makes sense, as the stakes are higher for Lenders.)
So if a Buyer can't qualify due to Credit Score requirements, Debt-to-Income (DTI) ratios, or other circumstances ... a first Mortgage loan to the maximum limits allowed for a "conforming" loan ... is then coupled with a 2nd Mortgage with a Fixed Rate, or a HELOC (usually an Interest-only Loan).
Since Interest Rates change regularly (and often quickly), I'll avoid specific discussions on current Interest Rates, as well as those varying loan amounts considered Jumbo-sized by regions throughout the country.
But suffice it to say, Buyers in the upper-end markets are currently seeing exceptionally low Interest Rates in the Jumbo Market, as well as more access to funding. And as referred to above, they're also finding that Banks and Lenders are competing for them. This should result in a more active exclusive home market in the months ahead.
Buyers will be able to select long term, Fixed Rate options. If they desire more flexibility and mobility, there will be some unbelievably low ARM products from which to choose. 5-year, 7-year, and 10-year Fixed Rate options ... with adjustment periods that start AFTER the 5th, 7th, or 10th year of the loan ... will be choices.
Savvy Jumbo Loan Borrowers understand that there are risks that come with an Adjustable Rate Loan after its initial Fixed Rate period is up, but because of the attractive Interest Rates, many will be willing to accept the terms.
Unusual times have certainly brought unusual opportunities. While home prices have begun to move up in many high-end housing markets, below-market financing is helping to take some of that "sting" away. Jumbo Borrowers can save tens of thousands of dollars in Interest Payments over the long run if taking advantage of current historically low Interest Rates.
* Hoping to Buy, Build, or Refinance a home in the Chicago area? In need of a Jumbo Loan or some other type of Mortgage financing? Contact Me Today! I'll put my 37 years of Mortgage experience hard to work on your behalf.
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Gene Mundt, Mortgage Lender, a Lender with 36 years of mortgage experience, will offer you exemplary mortgage service and advice when seeking: Conventional, FHA, VA, Jumbo, USDA, and Portfolio Loans in Chicago and the greater Chicagoland region, including: The Lincoln-Way Area, Will County, (New Lenox, Frankfort, Mokena, Manhattan, Joliet, Shorewood, Crest Hill, Plainfield, Bolingbrook, Romeoville, Naperville, etc.), DuPage County, the City of Chicago, Cook County, and elsewhere within IL.