Although the housing market is still in an uneven and sluggish recovery, mortgage lenders originated $18 billion in jumbo loans in the second quarter of this year. That's a 20 percent increase over the first quarter, according to an article in the Wall Street Journal. Historically, jumbo mortgages make up about 18 percent of the lending market, but in 2009 and 2010 dropped to 5 percent.
The rise in jumbo loans is attributed to low interest rates, which, according to the latest weekly Bankrate survey stand at 5.08 percent for a 30-year-fixed. Jumbo mortgages are those that generally exceed Fannie Mae and Freddie Mac limits of $417,000 (in some expensive areas of the country the amount is higher.)
The spike in jumbo mortgages during the second quarter is significant, but it doesn't mean obtaining one is a slam-dunk for wealthy borrowers. "More lenders are making credit available to jumbo mortgage borrowers and at attractive terms, but qualifying is no rubber-stamp approval," says Greg McBride, senior financial analyst at Bankrate. "Lenders require strong credit, down payments of 20 percent to 30 percent and proof of income."
Still, any positive news is a port in the real estate storm, though McBride is cautious about calling a recovery. "Sales of higher-end homes are being helped by the return of lenders to the jumbo mortgage marketplace and the current record-low mortgage rates," he says. "But we still have a few rough years ahead in the housing market as the imbalance between supply and demand is worked through."
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