Good news for buyers of million-dollar homes in California these days. Jumbo mortgages of $729,750 and up are once again becoming available to qualified borrowers. And at reasonable rates, too.
That means lenders in that Far Western state are willing to take a gamble on the borrower, as they did in pre-Recession times. The gamble is that the lending institution has to hold and service the loan himself.
It can't shuffle it off to Fannie Mae or Freddie Mac or have it insured by the Federal Housing Administration because jumbos are too large for those government-controlled agencies to handle.
That's an encouraging sign, the Los Angeles Times reports, because the market for jumbos, in contrast with the rest of the mortgage business, isn't being propped up by the federal government.
The Times reports the average interest rate recently on 30-year fixed-rate jumbos dropped to 5.79%, a nearly five-year low, according to rate tracker Informa Research Services of Calabasas, CA.
It later edged up to 5.88%, still an excellent rate compared to past years. The average rate is down from above 7% in late 2008.
Rates are even lower on so-called hybrid adjustable mortgages, on which the rate is fixed for five years and then adjusts annually.
Rates on jumbos soared during the financial crisis as lenders and loan investors avoided risks of any kind. Rates on big mortgages were especially high relative to those on smaller loans, the Times reports.
"The lower rates and somewhat easier terms reflect newfound confidence among banks in the housing market," the Times reports.