The market for high-end homes is doing well, as we’ve seen in recent home sales of Chicago properties priced at $1 million and higher. One reason for the improvement is that “jumbo” loans are once again becoming easier to get—good news for luxury homebuyers or homeowners looking to refinance a large mortgage.
The Wall St. Journal report last month that the amount lent for jumbo loans (larger than $417,000 in most parts of the country, the maximum limit to qualify for government backing) was up to $54 billion in the first quarter, up from $47 billion year-over-year for the same period.
Another good sign for jumbo loans is in the mortgage rates—the difference between a standard loan and a jumbo loan is smaller than it’s been since 2007. Plus, many lenders are becoming increasingly flexible in evaluating buyers with strong credit, and have even increased the amount of a home’s value that they are willing to finance.
With lending amounts going up for the affluent segment of buyers, along with increasing housing prices and consumer confidence, banks are looking to rebuild relationships with high-end buyers and simply put more loans on their balance sheet.
Especially in the $1-million-plus category, Chicago real estate is thriving, with luxury home sales up 35% year-over-year for the first half of 2013. Many banks are becoming more flexible on the many requirements that come with a large mortgage, but buyers still need to have strong credit and as much cash as possible. If you’re looking to purchase a Chicago luxury home, here are a few additional tips for getting the loan you need:
Look to your existing relationships: Banks may be able to make exceptions in lending for its current customers, since these buyers are more likely to repay loans and less likely to switch lenders.
Do your loan research: While adjustable-rate loans once led many buyers to run for the hills, they can sometimes be a more logical option in for a high-dollar loan. There also may be other options worth looking into, such as mortgages that let borrowers pay only interest (no principal) in the first few years. This isn’t a type of loan you see often, but for the jumbo borrower, it can make sense if you are looking to manage cash flow. Of course, these types of loans can be much more unpredictable, so its crucial to do your due diligence before deciding which is right for you.
Lock down a good rate: If you have a deal in place that makes sense with today’s rates, it’s a good idea to “seal the deal” and protect yourself against further rate moves, which are certainly expected in the near future.
Many high-end buyers have the cash and assets to support a jumbo loan, but there are many things to consider along the way. Low rates still make it a great time to buy, and high-end Chicago homes are becoming more obtainable as jumbo loans works their way back into the mix.
To discuss more about financing options for your real estate purchase, contact me at (312) 498-5080 or email me at [email protected]