If you've been dreading the substantial bump in interest rates that comes along with loans for purchases or refinances above $523,750 (which is the current conforming loan limit in the Boston area), you're not alone. Since about half of all condos sold in downtown Boston sell for more than $500K (according to the latest median Boston condo prices), I suspect there are a lot of people in the same boat. But now there is finally some good news for those of you thinking about buying or refinancing an "expensive" home or condo in Boston.
The Wall Street Journal is reporting that Bank of America is starting to push its jumbo loan program to consumers and that other banks will probably follow suit:
Bank of America recently began trumpeting its jumbo program, offering 30-year fixed-rate jumbo mortgages with rates in the high-5% range. "We decided it was time to really go after that market," says Vijay Lala, a product management executive for the bank.
More lenders may soon join in, says Guy Cecala, publisher of Inside Mortgage Finance.
Jumbo loans became increasingly scarce since the credit crisis began and subject to much tighter lending criteria and much higher interest rates (sometimes 2% or more higher than conforming loan rates). With conforming 30 year fixed rates now in the low 5% range, a jumbo loan in the high 5% range is much more reasonable:
The rates on 30-year fixed-rate jumbo mortgages averaged 6.5% for the week ended March 27 -- the lowest since May 2007, according to HSH Associates, a publisher of consumer loan information. On Oct. 31, a recent high point, the average rate on a 30-year fixed-rate jumbo mortgage was 7.9%, according to HSH data.
GMAC also has been pricing its jumbos aggressively, says Paola A. Kielblock, national product specialist for Fairway Independent Mortgage, a mortgage broker and banker based in Madison, Wis. She recently has seen rates in the high-5% to the low-6% range for 30-year fixed-rate jumbo mortgages, and the low-5% range for five-year adjustable-rate jumbos. Bill Higgins, chief lending officer for ING Direct, says his firm has been offering jumbos in the 5% range for several months -- even back when average rates were higher.
But it's not all roses:
Availability may be increasing, but requirements are still stiff. Bank of America jumbo loans, for example, require at least a 720 credit score and a 20% down payment (or 20% home equity on a refinancing). And borrowers need to have at least six months worth of reserves in the bank. ING Direct requires 25% down.
Still, it's good to see some loosening in the mortgage market. Maybe the government bailout money is finally working its way through the system, allowing Bank of America (and hopefully others) to actually lend to consumers. What a novel thought!
What are your thoughts? Comment below!