Investors are reluctant to purchase loans for more than that amount. This apprehensiveness forces buyers in expensive areas to figure out ways around the dilemma or just bide their time until the rates go down.
According to the trade publication, Inside Mortgage Finance, 16% of all new mortgages in 2006 were jumbo loans.
Bill McGoey, Senior Vice President at American Partner's Bank, owned by Federal City Bancorp, a thrift holding company in Washington, D.C. states that lenders are working to come up with new ways to get borrowers in to the homes they want to buy. Lenders have the tools in place, yet are having to tweak them to adapt to today's market situation.
Just last week, lenders were charging an average rate of 7.46% for prime 30 year fixed rate jumbo loans. This is compared with 6.57% for conforming loans. These figures are reported by the mortgage research firm of HSH Associates. "Piggybacking" loans is currently the easiest way around the "magic number" problem. Obtaining two $300,000 loans makes it easier to save ½ point than a single $600,000 loan.
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