High-end homes in the Chicago real estate market have come off of the housing slowdown somewhat unscathed, but luxury properties have been selling especially well in recent months.
And it doesn’t look like it will slow down any time soon. One reason, reported by the Wall St. Journal this week, is that interest rates for jumbo loans have actually dropped lower than those for smaller mortgages—something lenders say hasn’t happened before.
Jumbo loans—those too large for government backing, and higher than $417,000 in Chicago—have typically had higher interest rates because of the higher (and riskier) loan amount. But banks are slowly coming around and are more willing to offer jumbo loans to the right buyers, and at a great interest rate to boot. Banks want more loans on their balance sheets, and building relationships with high-end buyers through jumbo loans is a way for them to do that.
Of course, it’s still important to have all of your proverbial borrowing ducks in a row—clean credit, a sizeable down payment (at least 20%), assets, and a low debt-income ratio. But if you’re in the market to buy luxury Chicago real estate, now is a great time to make a move.
Getting a Jumbo Loan for Chicago Real Estate
If you’re looking at making a Chicago luxury real estate purchase, you’ll still need as much cash as possible and a strong credit history. Before you head to the bank, here are a few other considerations for looking into a jumbo loan:
Do your due diligence: Make sure you understand the different kinds of loans about there to avoid getting into one that could be riskier than you want. For example, adjustable-rate loans could be a viable option, but these types of loans can also be unpredictable. It’s crucial you understand the ins and outs of a mortgage loan to ensure it’s the right one for your particular situation.
Talk to your bank: Your own bank may be more flexible on loan terms than a run-of-the-mill lender, so I’d suggest checking with them first. Banks prefer lending to their current customers since these buyers are more likely to repay a loan and less likely to switch lenders.
Lock down the rate: If you have a deal in the works with today’s lower-than-conforming rates, lock it down to protect yourself from further rate moves.
While buyers in the Chicago luxury real estate market have the cash and assets to qualify for a jumbo loan, there are still many things to consider along the way. But it’s certainly a good sign that jumbo loans are working their way back into the mix for those interested in buying luxury properties.