The Luxury of Loans: Jumbos Face Major Overhaul

Posted: June 8th, 2011 by Just Real Seattle

As a French proverb says, “It is impossible to overd0 luxury.” As of October it may be a lot more difficult to get financing for it. While housing has struggled and distressed properties continue to flood the market, the luxury homes market maintains the most stability. The Seattle PI tells us: “Sales of waterfront homes in King County are still on the increase. Year-to-date, we’ve seen 152 waterfront homes sold in King County in 2011, up from 146 waterfront sales during the same period last year [and] in 2009, only 75 waterfront homes had sold at this point in the year.”

Things are about to get complicated – on October 1, Fannie Mae and Freddie Mac are set to decrease their loan limits from $729,750 to $625,500. Waiting in the wings, however, are private banks, private equity funds, REITs and hedge funds who are eager to step into the void left by Fannie and Freddie. This, they are saying, “increases the share of the mortgage market for the private sector and reduces future risk to taxpayers,” according to Martin Hughes, president of California-based REIT Redwood Trust.

Despite the upshot for private investors, loan limits can be especially challenging in higher-priced markets such as San Francisco, New York and certain parts of the Pacific Northwest. After Oct. 1, for example, a borrower who seeks a government-backed mortgage for a $1 million property may have to come up with a $370,000 down payment instead of $270,000.

While luxury buyers are out in force after the financial distress of the past few years, if they don’t get a move on before October 1, they may find that in the wake of these changes, the financing waters around their lakefront homes will become substantially choppier.

Call us for more information on a loan program that’s right for you! (866) 766.REAL [7235]

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