Wednesday, January 4, 2012 - Article by: CERTIFIED FUNDING CAPITAL CORP. - Certified Funding Capital Corporation -
The decline of the mortgage and real estate markets in 2008 had everyone wondering what would end up happening in the years to come, especially with higher priced homes and mortgages. Credit became tight as banking institutions found it too risky to continue lending as they had been doing in the past. As a result, jumbo mortgages were harder to get and when they were available, they were too expensive. The entire economy suffered while this decline happened everywhere across the country. As the shock of what had happened started to settle down, panic eased and jumbo mortgages actually made a comeback in 2011.
There are several reasons that this happened. As more consumers tried to save money, banks had more money to lend. When financial institutions have cash coming in, they will look to see what types of investments they could make. This made jumbo mortgages more appealing to banks. Banks then offered jumbo mortgages with historic low jumbo mortgage rates this past year. Right now, jumbo 30 year fixed mortgage rates are at 4.125%, jumbo 15 year fixed mortgage rates are at 3.375% and jumbo 5/1 adjustable mortgage rates are at 2.500%. These low jumbo mortgage rates, which are available with 0.7 to 1% origination fee, have been stable for quite some time. The amount of savings that can be obtained when purchasing a high end property with these low rates was unheard of going back a few years ago and current borrowers recognized this. When housing prices dropped around the country, high end properties were also involved in the decline. This scenario sent high end home buyers out searching for a bargain. High end properties were being discounted from their original prices due to market conditions and then could further be negotiated by buyers. This move in high end real estate then increased the need for jumbo mortgages. At the same time, the conforming mortgage loan limit was higher for most of the year, which freed up more funds for jumbo mortgages that are necessary above the limit.
The jumbo mortgage market for higher priced properties is really a different type of market. Many of the borrowers of this category, although affected by the economic downturn, did not suffer the same repercussions as middle class borrowers. With lenders more willing to offer low rate loans to these borrowers, jumbo mortgages made a comeback in 2011 and may very well continue to lead the real estate market in 2012.
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