The Bargain on Jumbo Loans! And It's Meaning For You.

It looks as if banks are trying to position themselves in retaining a high valued customer for a longer period of time. In a rather surprising move, the rates offered at some banks for jumbo loans have now dropped below those same rates for conforming loans. It is surprising because, it is really not all that common for jumbo loan rates to be at such a bargain.

This week, Wells Fargo is offering a 30-year fixed-rate jumbo loan at 4.000%, while they offer their 30-year fixed-rate conforming loan at 4.375%. US Bank is offering their 30-year fixed-rate jumbo loan at 3.750%, whereas their 30-year fixed-rate conforming loan stands at 4.125%. This is considered a major bargain, being that we are in a high-cost area where the average median sales price for a home this last quarter was roughly at $611,750.

To clarify for those that don't know, a conforming loan is a loan that is less than $417,000 nationwide, however in high-cost area's such as Santa Clara County and San Francisco loan restriction is to be less than $625,500. And as you would conclude anything above $625,500, would be considered a jumbo loan.

So why are the banks doing this? What is in it for them? Well for starters the banks want to attract clients that want to make big purchases, which means they will borrow a substantial amount of money from... you guessed it, the banks. And with the rates as low as the banks are offering them at, the likelihood of a refinance is rather low, which in turn will allow the banks to have the client on their books through the duration of the loan.

Now what does this mean for a prospective buyer? Well first and probably most important, especially being that we live in an high-cost area, a jumbo loan will allow you to borrow money for the house you had your heart set on.  As stated earlier, being that the median sales price of a home last quarter was $611,750, having a jumbo loan could mean moving into the neighborhood you desired or purchasing a home with that extra feature you coveted.  A jumbo loan also allows you to borrow the full amount of money in just one loan, instead of breaking the loan up and having two separate mortgages.  Having two loans can sometimes be a hindrance more than being helpful. And finally, a jumbo loan will allow you to avoid tapping into your savings when purchasing your home, and with the percentages that these rates are at you wont have to think about refinancing for the duration of the loan.

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CNN.com