In the US, the housing market is officially a buyer's market. With interest rates falling on mortgages, home prices falling and foreclosure numbers up, home buyers have a large number of properties to choose from. Some of the best deals in these home prices stem from larger and pricier homes. Yet it is difficult for borrowers to obtain jumbo loans.
Jumbo loans are loans priced above US $417,000. These loans are not readily available to most buyers because the US government backed organizations Fannie Mae and Freddie Mac are unable to purchase and therefore secure these loans. This has driven interest rates on these loans much higher.
Home prices on not too highly priced homes have fallen some 10 per cent or more. Interest rates also have fallen to the lowest levels in four years. This is not the case with these highly priced homes however. Banks have stopped providing these loans as readily as they once did.
Comparatively, 20 per cent down on a less than US $417,000 home for a family with good credit will net you an interest rate of 5.9 per cent. For homes valued at more than US $417,000, with 20 per cent down and the same credit level, jumbo loan buyers will have an average rate of 7 per cent.
As announced in the stimulus package endorsed by President Bush last week, jumbo loans up to US $729,750 will be allowed to be purchased by Freddie Mack and Fannie Mae for a limited time, allowing at least some relief for jumbo home loan buyers.
