When trouble in the financial markets made mortgage money hard to come by recently, jumbo loans became doubly hard to get. These large loans, greater than the Freddie Mac and Fannie Mae conforming loan limits of $417,000 in most parts of the country, became much too risky for many banks to have on their books. But things may be changing soon.
According to a recent Wall Street Journal article, Bank of America is the first to start advertising low rates on jumbo loans again. œWe decided it was time to really go after that market, says Vijay Lala, a Bank of America product management executive. The bank is now offering 30-year fixed rate jumbo loans with interest rates in the upper 5 percent range.
Interest rates on average, have started to come down for mortgage interest rates, reflecting in part the dramatic drops in conforming interest rate averages, that now hover just under 5 percent for 30-year fixed rate mortgages (FRMs). During the week ended, the national average for 30-year jumbo FRM loans was 6.5 percent, the lowest rate since May 2007, according to consumer loan information publisher HSH Associates. Such rates are much more palatable to consumers than they were during the second half of 2008. The rates peaked at 7.9 percent during the week of October 31.
When the mortgage crisis made investors pull back from mortgage-backed securities, this was especially true of jumbo loans. The large mortgages are not bought by Freddie and Fannie, meaning that if there are no institutional buyers for them these large, riskier loans stay on the banks™ own books. But now, as the credit markets are beginning to loosen up and banks have more liquidity as Americans pull their money out of stocks and invest in safer venues, banks have more cash to make these type of large and profitable loans.
Yet while many lenders may start to lower their jumbo rates to compete with Bank of America, the loans may still require borrowers to jump through high hoops and hurdles. For example, those who apply for the Bank of America jumbo loan, must have a credit score of 720 or better, and contribute a full 20 percent as a down payment. Plus borrowers, must prove they have six months or more of reserves sitting in the bank.
For those worried about qualifying, it is always good to check first to see if a jumbo loan is required. While almost any home in California and parts of Florida required a jumbo during the housing boom, today housing prices have dropped significantly in the former real estate hot spots, and Fannie Mae conforming limits have risen in some of those regions, reaching $729,750 in the highest prices ares of the country.
If you, or someone you know is considering Buying or Selling a Home in Columbus, Ohio please contact The Opland Group. We offer professional real estate advice and look forward to helping you achieve your real estate goals!
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