Jumbo Mortgages in Los Angeles
Affluent buyers of Los Angeles luxury homes are set to benefit from a strange twist in the mortgage system. For the first time in recent memory, jumbo mortgages are cheaper than regular mortgages.
Jumbo mortgages are above the limit for Fannie Mae and Freddie Mac loans, which is currently $625,500 for Los Angeles homes.
In the past, jumbo loans were usually offered at a higher interest rate than standard mortgages. Now, however, they average a quarter point less than regular mortgages. They also don’t have as many fees as conventional loans, making them cheaper over the life of the loan.
However, only borrowers with pristine credit and ample financial resources can qualify for these loans. Banks are dropping rates on these loans because they are able to cross-sell other products to their affluent borrowers and make more money over the life of the loan.
With rising values in Hollywood Hills homes and Los Angeles real estate, first-time home buyers will need jumbo loans to buy a home, but will have a hard time qualifying for them. Yet affluent investors will have no problem getting these mortgages. The top end of the market will continue to be bought up by investors who lease these properties out, creating an inventory shortage that will keep prices high. This will continue to make it difficult for first-time buyers looking for houses for sale in Los Angeles to break into the already competitive market here.
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Photo courtesy of Bankrate.com.