The national housing market is once again looking down favorably on affluent home buyers. According to the latest report from CNN Money, wealthy home buyers are paying lower average rates on high-dollar loans, also known as jumbo loans. In local markets such as Los Angeles, this is excellent news as median home values are already well into the jumbo loan stratosphere.
Over the last few months, affluent home buyers have been seeing lower interest rates on their loans than traditional home buyers. In most markets jumbo loans are considered for any property that is $417,000 or higher, or $625,000 in high-priced markets such as Los Angeles. The Mortgage Bankers Association reports that the average rate of a jumbo 30-year, fixed-rate mortgage was 4.24 percent. This is significantly lower than what buyers on the traditional market are seeing, which is currently a 4.36 percent rate.
In many cases, lenders are making it easier for affluent buyers to take out a mortgage on a high-end home. Lately, some lenders have been known to reduce their down payment requirements to as little as 10 percent, which is about half the normal rate. Others have been waiving requirements as well, such as private mortgage insurance.
Making things even more beneficial for high-end home buyers, banks have been lowering their credit standards for jumbo loan originations. Previously, jumbo customers were required to have a minimum credit score of 700 to qualify for such a large loan. Now, banks are considering applicants with credit scores as low as 650.
Lighter Mortgage Requirements May Boost Los Angeles Home Sales
As mortgages in the high-end range become cheaper and easier for buyers to obtain, home buyers in Los Angeles are seeing ideal conditions as the median home value in the city is well into the jumbo mortgage loan range. In high priced markets, any home above $625,000 is considered in jumbo mortgage range. According to Altos Research, a California-based real estate analytics company, the median single-family home value of Los Angeles is $646,900 as of September 19, well above what most markets are considering for jumbo mortgages.
The median price of Los Angeles homes has downgraded just slightly over the last few weeks. Prices had been climbing throughout the city from March and hit a plateau in early July. After a few weeks of steady price activity, home values dropped just slightly, perhaps as a regulatory response to the rapid increases noted earlier in the year.
Home buyers in Los Angeles are also looking at more homes to choose from in their search. Altos reports that as of September 19, there are about 2,060 properties on the market. This is a slight increase from earlier in the year, and as long as mortgage rates continue to give buyers bigger and better opportunities, conditions look good for an increase in home sales hopefully in the coming weeks.
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