Larger Mortgages Have Larger Interest Rates

While it is true that for most parts of the country home sales are down, home sales for more expensive homes have had an even larger drop due to the higher interest rates for larger mortgages.  A Jumbo Loan was previously considered a loan of $729,000 or more.  The three main lending and home mortgage instutiions, FHA, Fannie Mae and Freddie Mac are considering lowering the Jumbo amount somewhere around $650,000.

A recent article by Walter Molony at realtor.org states that  “the latest existing-home sales data shows transactions under $400,000 are 3 percent below a year ago. However, sales of homes priced at $750,000 or more have declined a whopping 47 percent.”  This drop is attributed to the fact that mortgages for these larger homes are significantly more that a conforming mortgage, making it less enticing for people to move up into a larger home.  The article continues to illustrate this point further, “To illustrate in dollar terms, if mortgage limits are permanently raised to $729,750, the maximum limit that expired at the end of December, the mortgage payment on such a loan would drop by $942 per month by lowering interest rates 2 percentage points. Over the life of a 30-year loan, the homeowner would save $338,000.”

In any event the hope remains out there.  If Jumbo loans are available for the same interest rates as lower conforming conventional mortgages the real estate recovery may speed along faster as more people would be willing to purchase a more expensive home.