Jumbo Mortgages Now Easier to Obtain for Chicago Luxury Real Estate Priced $1 Million and Higher
The last few years in Chicago real estate hasn’t made it easy for luxury home buyers to obtain a mortgage loan for luxury properties (those priced a $1 million and up). With tight lending standards from banks, getting a “jumbo loan” has been a difficult task.
But good news is on the horizon for luxury buyers—demand for jumbo mortgage loans is revving up, and as a result, the lenders are loosening up on high-end home loans. The Wall St. Journal recently reported that homes sold across the country with a loan of $1 million or more were up almost 28% through September, compared to just an 8.5% increase among homes priced under $1 million. This lift is the latest indication that jumbo loans are giving a boost to luxury home sales across the country.
Since tight lending practices have certainly impacted the Chicago real estate market in particular, I anticipate that this loosing up will lead luxury home sales in 2013 to be better than we’ve seen in 2012. Tight credit is still a big factor for many buyers, but jumbo loans are going to borrowers with credit scores as low as 700 (compared to 720 before), and financing can go up to $2 million from a previous limit of $1.5 million. These upward movements are a sign that lenders are confident in a housing recovery, and for it to be here sooner than later.
Why Luxury Real Estate Lending is Growing
After all of the hurdles to obtain even a conventional home loan in the last few years, why are jumbo loans seeing a comeback? The Journal highlighted a few reasons why:
- Particularly smaller lenders are returning to jumbo lending, whereas more conventional loans are still subject to stringent lending standards that resulted from the housing bust.
- Increasing demand among buyers has lenders taking action. When the market softened, luxury buyers were the ones who were able to put off any new home purchases, which left a less-steep price drop among high-end homes. Luxury buyers are now ready to make a move and beginning to “trade” homes with one another again.
- While investor purchases have driven down inventory on the lower end of the market, brokers and other say competition is growing on the luxury end, increasing prices and leading buyers to seek out a jumbo loan in order to purchase the new home they want.
What it Means for Chicago Real Estate
This is a great time for luxury buyers who have been on the fence about making a move to look into what’s available on the Chicago market. There are still opportunities for buyers to have the upper hand when negotiation a deal, but those will become few and farther between as the market continues to move upward.
To see what opportunities lie on the luxury market now or to discuss the current state of jumbo lending further, contact me at (312) 498-5080 or email me at ssalnick@dreamtown.com.
