Financing High-End Homes Beyond the Headlines
CHICAGO, IL, October 5 – In the current credit crunch, jumbo loans have generated jumbo headlines—and the news hasn't been good. "Jumbo Mortgage Rates Skyrocket," explodes one headline. "Creditworthy Borrowers Rejected for Jumbo Loans," screams another. And "High-End Homebuyers Nix Purchases, Seek to Sell Their Homes First" warns one more, throwing perhaps the darkest shadow of all on the state of jumbo financing.
Readers and viewers get the picture that the high-end market is in a limp, tail-between-the-legs mode. But is this a complete and balanced picture of things? Mike Dulla, president of United Home Loans (UHL), thinks not. "The media haven't been making the news up. But, in hammering away at only the negative, they haven't been giving us some of the complexities and subtleties of the marketplace. When you look at those things, you see that people are finding ways to buy and sell high-end homes, even in this uncertain jumbo mortgage market," said Dulla.
He and his Chicago-based company should know—they act as mortgage planners and advisors to their homebuying clients. "We help people manage the liability side of their balance sheet," said Dulla. That being the case, how does UHL view the liability of the jumbo mortgage, whose recent interest rate tends to run almost a point higher than the standard rate for lower-priced ($417,000 and under) mortgages?
Dulla and his staff recommend that purchasers of high-end homes consider splitting their jumbo mortgages into two separate loans. "The blended interest rate on both loans will be substantially lower than the interest rate on the jumbo fixed rate mortgage," said Dulla. He makes a presentation that demonstrates the savings, using a mortgage of $670,000 as an example. Under one jumbo loan, the purchaser would pay more than $4,600 a month. But under the UHL's recommendation of two smaller loans (a conforming loan and a home equity line), the same purchaser would pay a little more than $4,000—a savings of almost $550.
"That's not pocket change," said Dulla. "Besides, it's easier to get approved for the two smaller loans than it is for the jumbo mortgage. Just make sure you get yourself pre-approved, especially in this market." And there's one more key way to protect yourself, according to UHL: make sure there's a contingency plan in place to allow for the possibility that you won't be able to sell your current home right away.
Meanwhile, how do you relieve that fear in others—and get them to move on buying your home? Dulla recommends that you consider offering a six-month program of PITI (principal, interest, taxes, and insurance) abatement. You essentially agree to pay this amount as a contribution; the funds go into escrow and the buyer's first six mortgage payments come from the account. Typically equaling almost five percent of the sales price, this contribution can obviously serve as a tremendous incentive for someone to buy now.
"Even just this short discussion suggests that there are many ways to navigate jumbo home financing in choppy waters. You can't take the current media assessments too literally. For a real sophisticated and workable view of your current jumbo loan situation, come to United Home Loans. We can be a reliable, high-level partner in planning your dreams," said Dulla.
People seeking advice about mortgage strategy should contact United Home Loans