This might come as a surprise to many borrowers. The latest industry reports showed that jumbo loan rates in New Jersey and nationwide were lower, on average, than the rates for smaller conforming mortgage loans.

In New Jersey’s pricier real estate markets, like those within the New York City metropolitan area, home buyers often have to use jumbo mortgage loans to finance their purchases. A jumbo loan is one that exceeds the conforming loan limits established by the Federal Housing Finance Agency.

Because there’s a higher amount being borrowed, you might think jumbo loan rates in New Jersey would automatically be higher than those assigned to smaller loans. But that’s not always the case. In fact, the opposite is frequently true.

New Jersey Jumbo Loan Rates Lower Than Conforming?

For many years, jumbo loans did in fact have higher average mortgage rates than their smaller conforming counterparts. But we saw a reversal of that trend a few years ago.

The latest Weekly Application Survey conducted by the MBA revealed a continuation of this seemingly counterintuitive trend. Mortgage rates for jumbo loans in New Jersey and nationwide were once again lower than the average rates assigned to smaller conforming loans.

Here are some trends identified in the MBA’s report from October 25, 2017:

• Conforming: The average mortgage interest rate assigned to 30-year fixed home loans with conforming balances ($424,100 or less) was 4.18% during the third week of October.
• Jumbo: The average contract interest rate for 30-year fixed mortgages with jumbo loan balances (greater than $424,100) was 4.11% during that same week.

So in this weekly survey, and many of the ones that preceded it, the average jumbo mortgage rates for New Jersey were lower than conforming — the opposite of what some borrowers assume.

But these are average mortgage rates we’re talking about here. The actual rate you receive for a home loan will vary based on a number factors, including credit scores, down payment amount, and the type of home loan you are using.

Additionally, there are ways to secure a lower rate, such as the use of discount points. Some borrowers in New Jersey pay points for a lower rate on their jumbo mortgage loans. This is essentially a form of prepaid interest. You are paying more money up front in exchange for a lower rate. Contact us if you’d like to learn more about this strategy.

‘Increased Availability and Lower Pricing’

So what’s causing this trend? Why would the average interest rates for a New Jersey jumbo loan (a larger mortgage that exceeds conforming limits) be lower than a smaller loan? Joel Kan, an economist with the MBA, explained it this way in his comments to CNBC:

“A strong appetite for jumbo loans in a highly competitive jumbo market has led to increased availability and lower pricing … over the past few years.”

The point is, there are many different financing options available to home buyers (and refinancing homeowners) in New Jersey. As a borrower, your goal is to choose the best mortgage loan option for your particular situation. And that’s where we can help.

Let’s explore your options. Do you have questions about jumbo loan rates in New Jersey, or other mortgage-related questions? Please contact us for help. We can help you explore your financing options to choose the best loan for your situation.