• Mon. Dec 4th, 2023

    New Trends in High-Dollar Mortgages: A Fresh Perspective

    ByEmma Wolukau-Wanambwa

    Nov 20, 2023
    New Trends in High-Dollar Mortgages: A Fresh Perspective

    When it comes to mortgages over $1 million, the majority of them are not conventional mortgages. This can be attributed to the high price tags of these homes. Except for a few high-cost counties, where the limit for conventional loans is $1,089,300, most mortgage banks in the continental U.S. are only allowed to offer up to $726,200 in 2023.

    In cities where the average mortgage balance currently exceeds $1 million, it is evident that many homebuyers rely on jumbo mortgages to finance their homes. Jumbo mortgages are loans that surpass the conventional mortgage limit. Unlike most mortgages, these loans are not sold to Fannie Mae and Freddie Mac, the government-sponsored enterprises that purchase the majority of home mortgages in the U.S. Instead, banks usually keep these loans on their own books and apply stricter underwriting standards.

    Jumbo mortgage rates also differ from those of smaller conforming mortgages. Currently, the average rate for jumbo mortgages is even higher than the 7.50% average rate for conforming mortgages, exceeding 8% as of October 2023. However, earlier this decade, jumbo mortgage rates were slightly lower than conforming loan rates.

    The Impact of High-Dollar Mortgages:

    The perception of crossing the $1 million home price threshold as an achievement depends on one’s perspective. On one hand, properties that qualify for mortgages of $1 million or more are likely to be impressive and feature-rich. On the other hand, meeting the monthly payments for a million-dollar mortgage is beyond the means of most Americans.

    Based on an APR of 8%, a 30-year jumbo mortgage for $1 million would result in a monthly payment of nearly $7,400. This does not include additional costs such as taxes, insurance, and maintenance expenses associated with homeownership.

    Mortgage rates and monthly payments have considerably increased for all borrowers, regardless of the loan amount. The normalization of $1 million mortgages in more cities and counties might be a trend worth monitoring closely.


    1. What is a jumbo mortgage?
    A jumbo mortgage is a home loan that exceeds the conventional mortgage limit set by government-sponsored enterprises like Fannie Mae and Freddie Mac.

    2. Why are jumbo mortgage rates higher?
    Jumbo mortgage rates are typically higher because they are considered riskier loans for lenders. These loans usually have stricter underwriting standards and are not sold to government-sponsored enterprises.

    3. Is it common for homes to have million-dollar mortgages?
    While million-dollar mortgages are not common for most Americans, they are more prevalent in certain cities where housing prices are much higher.

    4. Will the limit for conforming mortgages increase?
    Based on historical data, conforming loan limits for single-family homes have been increasing over the years. It is likely that the threshold for conforming mortgages will continue to rise.

    (Source: [Experian](https://www.experian.com/))