Jumbo mortgages now less expensive than smaller loans

Banks will give you a better interest rate if you purchase a more expensive and, presumably, bigger home. The interest rate for a 30-year jumbo loan currently stands at 3.71 percent – a notch below the rate to get a “conforming” mortgage, which weighs in at 3.73 percent, says Greg McBride, senior vice president and chief financial analyst for Bankrate.

Jumbo mortgages now less expensive than smaller loans

The reduced rate on jumbo mortgages is actually a reversal with the typical trend over the years, where banks have charged higher rates of interest for larger loans for the theory that they will be inherently riskier.

However, the two rates “have gradually compressed over a few years,” McBride notes. “About 12 months ago, they flipped.”

Jumbo rates spiked during the Great Recession, rising to in excess of 1.5 percentage points higher than conventional, conforming loans before settling out one percentage point higher around 2011, according to HSH, an online mortgage resource site.

While smaller, conforming loans are backed by federal mortgage giants Fannie Mae and Freddie Mac, jumbos aren’t, which makes them inherently riskier to banks. However, conforming loans have become relatively more costly for banks to offer. That forces them to charge somewhat higher rates in comparison to jumbos.

Bankers have also determined that while jumbo loans may be bigger, the more affluent home buyers who take out jumbos are better bets overall, with lower default rates. As a result, lenders feel less pressure to add the expense of future foreclosures in the expense of a jumbo mortgage.

So if have been considering purchasing a home, now may be the time to do it. Nick & Cindy Davis can assist you here in the Tampa Bay & Surrounding Areas. We can be reached by clicking here or you can always call us at 813-300-7116.

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5221 Bayshore Boulevard #18, Tampa, FL

5221 Bayshore Boulevard #18
Tampa, FL

$175,000
- Lot Size
  
  2.00 ac
- Home Size
  
  644 sqft
- Beds
  
  1 Bed
- Baths
  
  1 Bath
- Year Built
  
  1976
- Days on Market
  
  1
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