While traditional, 30-year, non-conforming loans are hitting all-time-low interest rates, buyers are still struggling with high interest rates on jumbo loans (loans over $417,000) which has affected the higher priced homes, and their ability to close, which in turn brings down the median price of homes over all, which in turn continues to lead to bad press on the overall housing market, etc. etc. etc. It’s a vicious cycle.
Meanwhile, you still want to get a jumbo loan without having to pay jumbo interest rates, right?
A recent article in Fortune magazine recommends asking your mortgage broker – or even better your private banker – about a 7/1 (or even 5/1 depending on the size of your loan) ARM loan. Right now on a 7/1 loan you can get a fixed rate of 5.9% for 7 years (on a loan of less than $500,000) but understand that after that 7-year period it does start to adjust.
If you have a home you need to sell currently, but you find a dream home that would require a jumbo loan as a result, use the equity in your current home, to help finance the purchase of the new home, without having to take out a jumbo loan, until you sell your current home.
Finally, if you’re just short enough that you could fairly comfortably borrow money from your parents, or your rich Uncle Ken, offer to do so at an interest rate that makes it worth while for them, but is obviously less than the cost of the interest on a jumbo loan.
photo credit: mellomango
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