Are Jumbo Loans Becoming More Attractive?

 According to a recent market report, insurance limits for low-down jumbo loans are moving up in order to appeal to wealthier borrowers.

A number of private mortgage insurers are reporting that they have raised their limits on jumbo loans — some as high as $1 million, according to the report. The move could be a boon for wealthy investors who want to hold on to their cash, or for those high-salaried buyers with little money saved. However, some investors may get sticker shock over insurance fees, according to the report.

Competitive interest rates are a major factor in the increased demand for jumbo loans — generally anything over $417,000. Massachusetts-based Poli Mortgage Group explains that, while jumbo loans have historically been purchased in order to finance luxury or high-end properties, skyrocketing home prices during the housing bubble made it necessary for many home buyers to apply for jumbo loans for more modest residences. When housing prices dropped and foreclosure rates climbed, many investors shied away from purchasing jumbo mortgages “ and those that continued to provide them increased their interest rates.

But recently, the market has seen jumbo rates that carry the same “ or in some instances, even lower “ rates than conforming loans depending on the loan type. According to Poli, with tighter lending guidelines in place, foreclosures, defaults, and late payments are decreasing, causing a surge in confidence for investors, providing them incentive to buy jumbo loans again.

As a result, jumbo mortgages are seeing a comeback, and more competitive rates than before. This is good news for high-end home buyers who are seeing these rates when they seek financing.

Jumbo loan rates haven’t necessarily dropped drastically, but the rates on conforming loans have risen since their record lows, accounting for the closure of the rate gap between the two types of loans. Jumbo loans have even tighter qualification guidelines than conforming loans, but are still obtainable by borrowers who meet all of the loan criteria.

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