The Jumbo Mortgage Gold Rush
The 2013 mortgage gold rush is on – and it is in the jumbo mortgage lending market. Lenders continue to come to the market with extremely competitive jumbo mortgage products and many of these jumbo loans are actually priced lower than conforming loans (conforming loans are limited to $417,000).
As an example, the advertised rate for a jumbo 7/1 ARM was 3.125%/2.871 APR as compared to 3.25%/2.939 APR for a conforming 7/1 ARM (assumes 740 credit score, 80 LTV or less, SFD home, escrows). That is the lowest 7/1 jumbo ARM rate that United Home Loans has ever offered, according to Mike Dulla, President of United Home Loans. “This is an unprecedented time in the mortgage lending business. Although still well below pre-crisis levels, private money continues to flow into residential mortgage lending. Jumbo mortgages are viewed as very safe investments, especially with today’s underwriting standards.
Higher end borrowers are starting to apply for jumbo ARMs, even if they intend to stay in the property for a long time. An interest rate spread of 1% to 1.5% is too much to pass on for many educated borrowers who understand adjustable rate mortgage loans and are comfortable with the risk. Think about the savings – a 1.5% difference in rate is $15,000 per year on a $1,000,000 jumbo loan. If the borrower applies the difference in payment (30 year fixed minus 7/1 ARM payment) and applies it to principal, their balance will be $762,109 as compared to $872,604 – a savings of over $110,000.
If you understand jumbo mortgage financing and own a home in Illinois, Indiana, Minnesota, Michigan or Wisconsin, contact United Home Loans today at (708) 531-8388