Jumbo mortgages are making a major comeback. While the housing market continues to recover slowly, these private-market jumbo home loans recently have rebounded in a big way.
Larger home loans known as jumbo mortgages are up 20 percent from last year in the Clayton, Ladue and West County areas, according to local lenders. That’s more than double the jump jumbo loans have made nationwide this year, according to Wells Fargo & Co. “They have jumped over the past year because the higher-end homes have still been selling really well,” says Mark Cooper of USA Mortgage. Lower home prices also have contributed to the spike in jumbo loans, he adds. “The people who have the ability to buy high-end homes are getting steep discounts, and that’s creating good demand.”
When the credit crunch hit in 2008, there was a period of time where the jumbo market was virtually nonexistent, says Jamie Frazier of First National Bank. “Lenders had really backed off from far-ahead increased rates, so it slowed the market.” But throughout the past several years, lenders have eased up on the requirements. Today, to qualify for a jumbo loan—typically between $417,000 and $1 million—homebuyers must have their income verified on two years of tax returns. Some lenders also require a high-end credit score—at least 700 for a $500,000 loan, for example, Frazier notes. Additionally, some lenders will request more liquid assets on larger loan amounts. “This can vary greatly from one investor to another,” Frazier says. Customers also have to be prepared for a lengthier process. The loans, which are underwritten by the bank and not guaranteed by the federal government, have a 45- to 60-day return time.
Despite the longer process, Cooper and Frazier agree this is a good time to take advantage of historically low interest rates and get a jumbo mortgage for a discounted high-end home.