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Jumbo loans loom large in luxury housing

Jumbo mortgages are providing the housing market recovery with a boost, according to industry experts. Buyers looking at luxury properties currently can obtain jumbo mortgages with interest rates that are on par with – and sometimes even lower than – conventional loans.

Moreover, the new qualified mortgage regulations (QM) don’t apply to jumbos, which makes them a more flexible option for buyers who want things like interest-only loans or who have a high net worth but complicated finances.

Jumbo mortgages can make sense for financing a home purchase even when buyers have enough cash, we had a client who recently took a jumbo loan rather than paying all cash. “His thought was, with the gains in the stock market, why would I want to pay all cash if I can get 30-year money so low?” she says.

Jumbos are luring more buyers into “move-up” purchases, and this, in turn, is freeing up inventory at the lower end of the market.