Jumbo Loans Loom Large in Luxury Housing Market
The view of the Pacific Ocean from the San Joaquin Hills in the California community of Newport Coast is extraordinary. So, when Mohammad Taghavian started looking for a new home four years ago, he knew exactly where he wanted to be. The housing market, however, wasn’t so cooperative.
Taghavian, a 47-year-old engineer, jumped at any property that came on the market, only to find that whatever he bid, he was “edged out by a cash offer,” he says. He did what a keen home buyer would do. Taghavian kept raising his offer, from $600,000 to over a million. That placed him in jumbo mortgage territory — above $625,500 in his part of the country, and above $417,000 in lower-priced areas.
His real estate agent, Michael Salas of Coldwell Banker, honed in on one development and went on a letter-writing spree to about 60 homeowners with ocean views. When a $1.4 million townhouse finally came on the market last year, Taghavian snagged it. He moved into his dream home just before the new year.
For buyers like Taghavian who are looking at luxury properties that require jumbo mortgages, 2014 is already a banner year, industry experts say. Interest rates on jumbo mortgages used to tower over conventional mortgages because they are considered riskier. But the rates for jumbos have dropped because of economic conditions, and are now almost on par with conventional mortgages — or sometimes even lower. In addition, new federal regulations that went into effect in January don’t apply to jumbos, making them more flexible for buyers who want things like interest-only loans or who have a high net worth but complicated finances.