If you can’t have a hippopotamus for Christmas, would an elephant do?
Recently an article caught my eye in the Trib …. “Uber wealthy snatch up Utah’s luxury homes” who are “drawn to Utah’s mountain resorts and accessible, year-round recreation. They are tending to pay cash and sometimes browse for months before closing.”
- Luxury home sales of homes $1M+ increased 49% since the beginning of 2013.
- Luxury homes listed between $750,000 to $1M increased 36%.
- “Utah’s most populated county has already had five sales in the $3 million-plus price range so far in 2013, including two in Holladay, one a $3.9 million home and another valued at around $10 million that sold in early fall.”
- Median home prices have increased regionally; however Park City’s median price was the most dramatic reaching $1,295,000 at the end of September. In fact, the 3rd Quarter sales volume for the greater Park City area was over $1.19 BILLION.
Generally Luxury Home buyers considering a jumbo loan are already aware large cash reserves are often required for purchases over $417,000 as well as high interest rates – higher than conventional mortgage rates.
Some lenders also require their borrowers to have a reserve of up to 12 months’ worth of mortgage payments in the bank or liquid assets for purchases from $417,000 to $2 million according to a recent article from the Wall Street Journal Online. (For loans over $4 million the figure is more like 36 months’ worth of reserves.)
Cash reserves aren’t the only thing super-sized. Down payments are larger on a jumbo loan too. Most lenders require at least a 20% down payment for jumbo loans with some going as high as 45%.
If you don’t quite meet some of those criteria exceptions can sometimes be made. This is especially true if you call on a lender that you’ve done a great deal of business with. Items like reserve amounts can sometimes be tweaked with the right relationship or for a buyer who is strong in other respects such as credit or down payment.
Why the big costs? Jumbo loans represent a larger investment and a larger risk to the lender. Many of these homes are customized, making them appealing to a smaller pool of specific buyers so if the loan goes belly-up the home will be more difficult than average for the lender to unload.
However, Jumbo Loans are becoming a more attractive option to financing Luxury Homes.
With the traditional interest rates increasing, Jumbo mortgages are an attractive investment, and the Lenders are rewarding their Jumbo Loan customers with lower Interest rates.
According to Housingwire.com, “A combination of interest rate volatility, government policy and banks flush with cash has made jumbo mortgages more attractive than conforming loans.
As The Wall Street Journal explained, “Executives say the inversion in the so-called spread, or difference, between jumbo and conforming loans is unprecedented. "In my 30-year career, I've never seen nonconforming loans priced below conforming loans," said Brad Blackwell, executive vice president of Wells Fargo Home Mortgage.”
The Holidays are a great time to buy a Luxury Home in the Salt Lake City area, especially with the lower Jumbo Loan rates. Give us a call! We have a team of local real estate and lending professionals committed to selling some of the most desired homes in Utah.
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