Higher Interest Rates: Jumbo

Is there some actual signs the real estate market is coming back to life?

So for in 2009 the the mortgage industry has seen it’s lowest interest rates in 50 years. The government has given unprecedented tax credits up to eight thousand dollars just to buy.

Refinancing is showing signs of life with long term mortgage rates in the 4.5% range. Refinancing a loan over $417,000 though may not be so easy. Jumbo mortgages are loans go beyond the limits of conforming loans which are backed by Fannie Mae and Freddie Mac. The maximum loan size is $417,000 for a single family residence which is quite often below the median loan amount in most areas especially in California. The conforming jumbo was created to address this issue and goes up to about $729,000 in some high cost counties.

Before the housing market collapse the difference between jumbo mortgage rates and conforming mortgage rates was as low as .25%. Today, the difference is tremendous and almost 2 1/2 percentage points. Without the good old portfolio lenders like World Savings jumbo loan availability has dwindled as the risk involved dries the ink out of the underwriter’s approval stamps. Jumbo mortgage loans were already consisdered high risk previous to the market collapsing. Today this risk is reflected with higher interest rates. Even though banks are gaining cash from scared investors who put their cash into FDIC insured savings accounts credit remains super tight. The rise in refinance applications on conforming mortgages is just another result of lower interest rates and we can only hope that soon the government takes bold moves to lower the rates and increase the available credit on the once prosperous jumbo loans.

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