Friday, 10 April 2009

The Return of Jumbo Mortgage?

Interesting article from Wall Street Journal about possible sign of return of Jumbo Mortgage.

The Return of Jumbo Mortgage

As you may know, due to recent tightening of lending, I've believe approx. 80% mortgage issued are GSE (Fannie Mae/Freddie Mac) backed "Conforming Mortgage". Since conforming mortgage limit is $417,000 (in expensive cities like San Francisco, it is $729,750), tight financing guideline for Jumbo Mortgage has slowed down high-end real estate market drastically. Even if you are qualified, borrowers had to pay approx. 2% higher rate than they do on conforming mortgage.

This article report about lowering rates on Jumbo Mortgage:

Bank of America recently began trumpeting its jumbo program, offering 30-year fixed-rate jumbo mortgages with rates in the high-5% range. "We decided it was time to really go after that market," says Vijay Lala, a product management executive for the bank.

The rates on 30-year fixed-rate jumbo mortgages averaged 6.5% for the week ended March 27 -- the lowest since May 2007, according to HSH Associates, a publisher of consumer loan information. On Oct. 31, a recent high point, the average rate on a 30-year fixed-rate jumbo mortgage was 7.9%, according to HSH data.

At this moment, conforming mortgage rate is around 4.75%. It looks like "premium" on Jumbo Mortgage has reduced to 1% (Vs. 2% 6 month ago).

While lending guideline is still very tight (31% PITI on Income Ratio, 20%+ down payment, etc..), I think this is very good news on expensive real estate markets like New York City and San Francisco Bay Area.

Happy Investing!!!


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  2. Jumbo mortgage loans provide financing to those who need a loan above conventional loan limits.

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