I hear over and over again from Realtors that there aren’t any jumbo products out there anymore. We need to forget the past and focus on 2011. There are a plethora of jumbo loan programs available to potential buyers, and we need to start selling them again.
The way I see it, there are essentially three different categories of ‘jumbo listings’, if I can coin that phrase, in relation to the financing products available. There are the properties priced between $500K and $750K, $750K and $1M, and $1M on up.
For your listings in the $500K to $750K range, you have, by far, the most options. Currently there are multiple second mortgage programs that allow for a borrower to take on a conforming first mortgage, and a home equity line of credit, or fixed rate second, up to 90 percent of the value of the home. That allows a ton of flexibility for the potential buyer, who may want to pay down that second mortgage over the next couple of years, so they are only carrying the conforming first mortgage. There are also programs that allow for a single first mortgage, with lender paid mortgage insurance, up to 90 percent of the loan to value of the property. This product allows for a mortgage up to $625,000.00 at 10 percent down. With the PMI built into the interest rate, your buyer also maximizes their interest deduction at tax time.
For those listings between $750K and $1M, you have your choice between very competitive ARM or fixed rates up to 80 percent loan to value. Currently, you can finance up to $1M at 3.75 percent on a 5/1 ARM. Think about that! That’s unreal in terms of cheap money. I have a car and student loans that have higher interest rates than that. Why aren’t we selling that to our potential jumbo customers?
Over $1M, the market is still really, really aggressive. A 5/1 ARM on a loan amount of $1.5M can be financed as low as 3.75 percent, with 30 percent down.
These rates are unheard of in the jumbo market, and in five years, people won’t even believe this was ever available. So, why all the negativity? I say, let’s get out there and tell our buyers and sellers that they will never again be able to finance jumbo loans at lower interest rates. If ever there was a time to jump into the luxury market, it’s now. With prices lower than they have ever been and money cheaper than ever, it just makes sense.