Jumbo Jumping
Jumbo mortgages were much easier to come by before the housing crisis erupted and home values began to fall. Following these events, jumbo loan interest rates jumped and lenders tightened their restrictions on applicants. Consequently, only approximately 5 percent of total mortgages issued in the last two years were jumbo loans, compared to as much as 20 percent from 2004 to 2007.
But according to data issued by Inside Mortgage Finance Publications Inc., jumbo lending increased 20 percent in the second quarter versus the first quarter of 2010, with lenders originating $18 billion in jumbo loans. Leading the way are smaller banks, which can process this type of loan in only 30 to 60 days compared to big name lenders, which often take two to four months.
Demand for jumbo loans has increased significantly over the past quarter, according to David Adamo, CEO of Luxury Mortgage in Stamford, Ct., because many financial institutions that have accumulated large amounts of cash are looking to generate better returns.
Jumbo loan rates currently can vary between 5.5 to 6 percent, depending on the size and packaging of the loan – significantly higher than the current rates for conventional 30- or 15-year fixed loans.
(A jumbo mortgage is needed for any mortgage that exceeds the conforming loan limit – the maximum loan size that Freddie Mac and Fannie Mae can purchase – which is currently at least $417,000 and as high as $729,750 in some areas of the country.)
