Home prices in New Jersey have climbed steadily over the last few years, and the general consensus is that they’ll probably continue along that path for the foreseeable future. That means more and more home buyers in New Jersey could turn to jumbo loans to help with their purchases — especially in pricier real estate markets like those within the NYC metro area.
And there’s some good news on this front. According to a recent industry report, access to jumbo loans in New Jersey and nationwide has increased over the past year.
Rising Home Prices, Bigger Mortgage Loans
When home prices rise, so does the size of the average mortgage loan. That’s what we are seeing across the state right now, and across the broader U.S. as well.
The median home value for the state of New Jersey rose by around 8% over the past year or so, according to Zillow. That’s a bigger increase than the national average for the same time period. Looking forward, the company’s economists predict that prices will continue rising for the foreseeable future. In this way, New Jersey mirrors most real estate markets in the country. House values are expected to keep climbing.
So we could see a corresponding increase in the number of New Jersey borrowers using jumbo loans for a home purchase.
Definition: In terms of their size, most mortgage loans can be classified as being either “conforming” or “jumbo.” A conforming loan is one that meets the size restrictions used by Fannie Mae and Freddie Mac. A jumbo loan in New Jersey, on the other hand, exceeds the maximum conforming limit for the county in which the home is located. So it’s too big to be sold to Fannie or Freddie.
While jumbo loans often have lower average mortgage rates than their smaller conforming counterparts, they sometimes bring stricter qualification criteria. That’s because of the larger amount of money being borrowed, and the corresponding higher level of risk.
But there’s good news for those seeking a jumbo loan in New Jersey or elsewhere in the country. Industry analysts recently reported that there is now broader access to these “oversized” mortgage products.
New Jersey Jumbo Loans More Readily Available
In August 2018, the Mortgage Bankers Association (MBA) published a report showing improved access to mortgage credit across the board, and for jumbo loans in particular.
According to Joel Kan, MBA’s Associate Vice President of Economic and Industry Forecasting:
“Credit availability continued to expand, driven by an increase in conventional credit supply. More than half of the programs added were for jumbo loans, pushing the jumbo index to its fourth straight increase, and to its highest level since we started collecting these data. There was also continued growth in the conforming non-jumbo space, which reached its highest level since October 2013.”
MBA analysts used loan data provided by Ellie Mae, a software company that serves the lending industry. From that, they determined that mortgage credit availability increased by 1.7% in July 2018. That indicates a general “loosening” of credit across the board, which in turn means that borrowers have better access to mortgage financing these days.
In New Jersey, jumbo loans are most commonly used in higher-priced real estate markets, like those that fall within the New York-Newark-Jersey City metropolitan area. But, they’re also sometimes used in more affordable markets by buyers purchasing a “high-end” home that exceeds the loan limits within that county.
Have mortgage questions? NJ Lenders offers a wide variety of mortgage options for borrowers, including both jumbo and conforming loans. Please contact us if you’d like to receive a mortgage quote, or if you have financing-related questions.