How the Difficulty of Getting Jumbo Loans May Hurt Home Sales in the Traverse City Area
Despite my many years in the business I was really not aware of the significance of how specific types of financing really affected property sales. For example when I first started in the business in 1991 I only sold vacant land. If you wanted to purchase vacant land you either paid cash, got a home equity loan (people actually had equity back then) or you got some type of owner financing. Bank financing wasn't really an option.
As credit began to flow, more and more banks were offering vacant land financing. It started with 25% down then it want to 10% and finally $0 down with interest only payments. The availability of credit fueled the fire by creating more demand and priced continued to rise. When the bubble burst so did vacant land financing and the market for vacant land came to a screeching halt with it.
Back to jumbo loans.... In the Traverse City area I believe any loan over $414,000 is considered a Jumbo Loan and these days that means that if you need on, you will be paying a much higher interest rate than a convention loan. Why? Simply because lenders are not buying high dollar mortgages and longer and with not market for the paper (the note) they are considered higher risk.
There are now 3 types of loans - Loans up to $417,000 are considered "conforming," loans between $417,000 and $729,500 are "conforming jumbo," and loans over $729,500 are "super-jumbo." Although conforming mortgage rates are at 50-year lows, jumbo loans in general continue to remain very costly in comparison to conventional rates.
How does this affect you if you have a property that would require a buyer getting a jumbo loan? The short version is you will have a far more limited pool of buyers than you would have 5 years ago even if your selling price is significantly lower. Those low rates you hear on the radio and television are not available on your home if it is in the higher price ranges.
Higher interest rates raise the effective value of a home significantly. I won't bore you here wit the details but I would be happy to discuss your situation with you if you call me. I can be reached at 231-218-5199.
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