As we’ve seen in the past few months of luxury sales, there are a number of buyers who purchase luxury homes with cash. But even if you have the cash, buyers might consider keeping it on hand and getting a mortgage. For high-priced properties, jumbo loans can offer buyers a number of incentives that keep cash in their pockets.
Jumbo loans in Chicago are those in excess of $417,000. That is the dividing line between a conforming loan and a jumbo, though it is higher in locations like California. After the housing downturn, many were shying away from jumbo loans, as they were seen as risky for lenders or too stringent for buyers.
Jumbo Loans Coming Back Strong for Lenders and Buyers
But today, lenders are embracing jumbo loans, even as mortgage activity has slowed down overall. In May, the number of mortgage applications had decreased, more than likely due to rising home prices, cash-only buyers and tight credit standards. But through that, jumbo loans remained stable.
So why the influx of jumbo lending? Lenders are eager to woo low-risk, wealthy clients with strong credit and substantial assets to back up a jumbo loan. And luxury real estate buyers are taking advantage of attractive jumbo loan offers with low interest rates, flexible underwriting and credit availability.
Even for buyers with plenty of cash, there are a number of things to consider if you’re buying Chicago luxury real estate with a mortgage loan:
Lower down payments: To encourage upscale buyers to consider a mortgage loan, some lenders are relaxing the standard requirement of a 20% down payment in favor of lower amounts. That could leave buyers with more cash on hand to invest elsewhere or keep liquid.
More choices among lenders and loans: Small banks and credit unions are putting their cards into jumbo lending, offering aggressive pricing and features to compete among big-bank loans. Borrowers have plenty to choose from to find a loan that fits their needs best.
Tight borrower standards: Jumbo loan borrowers must be in excellent credit standing—these stringent standards are precisely what help jumbo loans remain viable for lenders. A good credit score, sufficient reserves and strong income are all required for jumbo lenders.
If you’re considering purchasing Chicago luxury real estate, give me a call to talk about what your options might be with a jumbo loan. Contact me at (312) 498-5080 or email me at email@example.com.