Low jumbo mortgage rates in time for spring housing market

As mortgage rates slowly rise, the difference between conforming and jumbo loan rates is shrinking, and this is good news for buyers of higher-priced homes.

“The jumbo market has heated up, as tight lending guidelines have drastically reduced consumer late payments, strategic defaults, and foreclosures,” wrote Julian Hebron, a mortgage banker in California and author of the blog The Basis Point. “This gives investors confidence to buy jumbos again, which means lower rates for consumer borrowers. These borrowers can count on lending guidelines remaining tight, but all that means is a bit more paperwork when getting a loan.”

Ever since October 2011 when conforming loan limits dropped to $417,000 nationwide, and to $625,000 in designated high-cost areas (which includes most parts of New Jersey), the demand for jumbo mortgages has grown in step with the housing market recovery.

Whereas lenders can sell their conforming loans (usually to Fannie Mae and Freddie Mac), jumbo mortgages are funded by banks or private investors who hold these loans in their portfolios.  There is a usually a premium in the rate as a result.  However, in recent weeks the spread between jumbo and conforming mortgage rates narrowed to between 0 – 0.25% from close to 0.50 – .75% a year ago.  Both are currently hovering under 4% which is great for buyers of larger, more expensive homes.



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