Jumbo mortgages have made a comeback following the housing bust and should be readily available to buyers with good credit, even as the Federal Housing Administration lowers its maximum loan limit in the Washington metro area from $729,750 to $625,500 on Oct. 1, real estate experts said. After 2008, the jumbo loan market that finances upper-bracket housing purchases collapsed. Credit restrictions tightened and banks, struggling to regain their footing, were reluctant to back large sums of money.
“We didn’t have jumbo loan products after the crash,” said Donna Evers, president of real estate firm Evers & Co. “We didn’t have $1.5 million loans like we do now, with 20 percent down at 4.25 percent, even a year ago. It took quite a bit of time.”
Jumbo loans in the $1 million to $3 million range, with interest rates between 4.25 percent and 4.75 percent, are available to buyers with credit scores of at least 740, Evers said. To snag one of these loans, buyers must have their paperwork in order, and Evers recommended using smaller, local banks.
“Big banks are having a tougher time,” she said. “Underwriters with stacks of loan requests on their desks are far away. Small, local banks have smoother-running operations. You call the lender and the underwriter is right there.”
All types of jumbo loans, from standard 15- and 30-year notes, to loans with home equity lines, and adjustable-rate mortgages, are available. During the subprime crisis, ARMs with teaser interest rates got a bad rap because they were approved for buyers who couldn’t afford them in the first place.
“ARMs are really coming back,” said Troy Toureau of McLean Mortgage. “They are meant for people who know they are going to be in a house for a certain period of time. They’ve moved to D.C. for a government job for a few years. They were not meant for buyers to get a bigger house.”
Agents and mortgage brokers said sales activity has increased in an effort to close deals before the deadline.
“Title attorneys will be working 24 hours a day at the end of September, Evers said. “Borrowing is so cheap and we are in our 15th straight month of price increases in a steadily improving market.”
Though most expect the effect of the new limit to be minimal, Toureau is concerned the lower FHA loan limit may affect the move-up buyer market — specifically buyers in the $625,000 to $750,000 range.
“In the high-balance conforming and jumbo market, no one was moving up. No one was selling $500,000 and buying at $1 million,” he said. “Recently, people have been moving up. There will be a small percentage of buyers in the $625,000 and $729,000 range who will no longer be able to put 3.5 percent down. It may hurt the market in that range.”
Fred Bowers, president of Intercoastal Mortgage, said jumbo money is there but restrictions are tighter and he is concerned the FHA reduction will mean homes stay on the market longer as buyers have a tougher time qualifying.
“The impact will be more demand for jumbo loans because of the decrease in the limit,” he said. “Bottom line is that it will cost the buyers more.”
