For clients seeking to buy larger homes, and even for those hoping to buy a modest home in expensive markets, we have good news. Jumbo loans have returned as a viable option.
If you need a mortgage larger than conventional loan limits ($822,375 in Hawaii, 2021) chances are now good we can get you the financing you need without paying a whole lot more in rate compared to a conventional loan.
Jumbos for High-Credit Borrowers Offer Attractive Rates
Lenders see the end of the pandemic tunnel, and their core audience for Jumbo loans actually came through the crisis in reasonable shape. These prospective borrowers stayed employed and had fewer expenses than normal. This allowed many to build assets. Now more are ready to buy. As such, the marketplace for these larger loans has grown.
A persistent myth about Jumbo loans is that they are pricey. Not so. A borrower with good credit and a 20% down payment can currently find Jumbo 30-year loan rates only 10-20 basis points (0.1%-0.2%) higher than conforming 30-year fixed rates. That’s a relatively small risk premium. Because the marketplace has grown, there’s a lot of competition between lenders offering Jumbo loans (to a relatively smaller segment of the total housing market), so rates tend to stay competitive.
Joel Kan, Associate Vice President of Economic and Industry Forecasting with the Mortgage Banker’s Association, said, “Jumbo availability is increasing again as the economy regains its footing and coincides with the strong demand for homebuying and accelerated home price growth in many markets.”
When do you need a Jumbo loan?
They are ideal for larger properties, or even typical homes in higher-cost areas, where a conventional loan cannot cover 80% of the purchase price.
Four Main Hurdles for Qualifying for Jumbo Loans
• Higher credit and more conservative debt-to- income ratios are usually required
• More substantial reserves are usually required (6-12 months of typical expenses)
• It’s a larger loan, with larger payments, so you’ll need sufficient income
• Down payments are usually 10-20% with no low-down payment programs
Many homes have moved up in price, as we all know too well. If the home you’re hoping to purchase has bumped up into Jumbo territory, you’re in luck with the healthy return of these programs into the market -- their rates are surprisingly good.
Contact us for a consultation today at 808-566-6611.