Jumbo loans are the bomb!

Home - Santa Fe Real Estate Guide - - MORTGAGEMATTERS SANTAFEREÁL - JIM GAY

I re­cently closed a $800,000 home loan pur­chase at 3.625 per­cent for the first 5 years? WHAT? Ab­so­lutely great.! The bor­rower’s plan was to sell a home they pre­vi­ously oc­cu­pied and use that eq­uity to pay down the new loan they needed to pur­chase their new home. They were tak­ing ad­van­tage of the vast re­cov­ery and avail­abil­ity of Jumbo home mort­gages. “Jum­bos” are loans in ex­cess of $453,100, a new limit as of Jan­uary 2018. Jum­bos have been his­tor­i­cally scarce and very ex­pen­sive since 2009. But now, in 2018, avail­abil­ity from many in­vestors have sur­faced and mort­gage bro­kers are be­ing en­cour­aged to bring them on. As sale prices in Santa Fe in­crease in the next year, the news could not be any bet­ter.

For the past few years, many homes have sold for dou­ble or triple the $417,000 Fan­nie Mae limit and the lack of jumbo loans has been a problem. Pur­chasers have paid cash due to rea­son­able fi­nanc­ing be­ing more dif­fi­cult to achieve for a jumbo as com­pared to a con­form­ing Fan­nie Mae loan. When fi­nanc­ing is both avail­able and ben­e­fi­cial to an in­di­vid­ual’s fi­nan­cial plan, mort­gages make sense for most. So, when the jumbo mar­ket loosens, real es­tate sales im­prove and the mort­gage busi­ness rocks! Realtors and po­ten­tial pur­chasers can be heard re­joic­ing!

I re­mem­ber back in 2009, when a bor­rower need­ing $600,000 paid the cur­rent jumbo rate of 7.5 per­cent to 8 per­cent while the Fan­nie Mae rate was 5 per­cent on loans un­der the $417,000 ceil­ing. In those days, we would split the fi­nanc­ing re­quire­ment into two pieces. The bor­rower would get a Fan­nie Mae 30-year loan at 5 per­cent plus a home eq­uity loan for the amount above $417,000. Even in 2012, the pref­er­ence was to split the loans with a $417,000 first and a home-eq­uity line of credit (HELOC) sec­ond. It worked, but was time-con­sum­ing, of­ten caus­ing de­layed clos­ings.

Let’s look at what is avail­able now. In the first quar­ter of 2018, jumbo fixe­drate loans and ad­justable-rate mort­gage (ARM) loans will flour­ish. A jumbo 5-year ARM can be se­cured at 3.625 per­cent. A 7-year ARM has a rate of 3.75 per­cent and the 30-year fixed-rate jumbo is at 4.25 per­cent. Ex­cel­lent rates that we have not seen for years. HAPPYNEW YEAR! Jumbo in­ter­est rates will re­main higher than the Fan­nie Mae rates, but not by much. The Fan­nie 30-year fixed on a $453,100 loan is at 4.00 per­cent com­pared to 4.25 per­cent for a jumbo.

This jumbo prod­uct ex­pan­sion could sig­nal a loos­en­ing in the fi­nan­cial mar­kets. When avail­abil­ity in­creases in any prod­uct the com­pe­ti­tion re­sponds and con­sumers ben­e­fit. The same prin­ci­ple ap­plies in home loan fi­nanc­ing. More jumbo prod­ucts at lower rates will spur other lenders to lend at fa­vor­able rates for loans above $453,100.

Lenders are also re­al­iz­ing that, for the most part, bor­row­ers seek­ing jumbo loans have ex­cel­lent credit and in­come. Th­ese stel­lar home­own­ers, par­tic­u­larly in Santa Fe, will also en­cour­age lenders to ex­pand their loan avail­abil­i­ties. The jumbo bor­row­ers I have worked with this year have ex­cel­lent credit and enough in­come to se­cure the mort­gage amount nec­es­sary for their pur­chase.

Spread the word that JUM­BOS ARE BACK! No longer do bor­row­ers need to think in terms of huge down pay­ments for their $1,000,000+ prop­er­ties.

Jim Gay was a real-es­tate bro­ker for 20 years and has been a fi­nan­cial con­sul­tant to For­tune 500 com­pa­nies. He is cur­rently a bro­ker/owner atThe Mort­gage Place, Inc. (986-9080) and can be reached at jim@ jim­gay­home­m­o­rt­gage.com.

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