February 11th, 2010 7:00 PM by Richard T. Cirelli
Jumbo lending ‘alive and well’ in Laguna
As we turn a more focused lens onto the Laguna Beach housing market, it’s important to explore the types of financing available in this market and the types of transactions being made.
This is a city where homes for sale soar to the tune of $30 million, and a city where the average active listing price is $3.8 million.
To help us better understand Laguna’s mortgage industry, Certified Mortgage Planning Specialist Richard Cirelli with Laguna Beach-based RTC Mortgage Corporation discusses jumbo loans:
“First of all, I would like to dispel the myth that there is no “Jumbo” financing”. Jumbo financing to $2 million or $3 million or more is available to qualified buyers with down payments of 20% to 30% in Laguna Beach and other high-priced markets. The definition of a “Jumbo” mortgage is one that exceeds the maximum loan limits for “conforming” loans that are saleable to Fannie Mae, Freddie Mac or insured by the Federal Housing Administration (FHA). The maximum conforming loan limit for a single family house in Orange County is $729,750. Accordingly, a “Jumbo” loan would be defined as loan that exceeds that amount.
A search of all sales transactions in Laguna Beach in 2009 reveals 91 homes that sold for more than $1 million and were either bought with cash or financed with Jumbo loans (this sample excludes properties that may have been bought for more than $1 million using conforming financing with loans less than $729,750). Of these 91 sales, 53 transactions (58%) were bought with cash and 38 (42%) were financed with Jumbo loans. Of the 38 Jumbo- financed transactions, only 5 appear to be financed by the seller or other private parties. Therefore, 33 transactions were financed with institutional loans. Fourteen different banks were responsible for those 33 financed transactions.
As previously mentioned, 14 different lenders provided Jumbo loans in Laguna Beach last year! As opposed to “conforming” loans where every lender offers the exact same product with no variation in underwriting guidelines, Jumbo lenders don’t all underwrite to the same criteria. Therefore, it’s important to work with a mortgage broker such as RTC Mortgage Corporation that has access to multiple lenders and knows the nuances of each lender and their guidelines. All lenders do require documentation of income to qualify but Jumbo lending is alive and well in Laguna Beach.”