Jumbo Loans Archives - Scotsman Guide https://www.scotsmanguide.com/tag/jumbo-loans/ The leading resource for mortgage originators. Wed, 01 Nov 2023 18:48:22 +0000 en-US hourly 1 https://wordpress.org/?v=6.0.2 https://www.scotsmanguide.com/files/sites/2/2023/02/Icon_170x170-150x150.png Jumbo Loans Archives - Scotsman Guide https://www.scotsmanguide.com/tag/jumbo-loans/ 32 32 2023 Top Jumbo Originators https://www.scotsmanguide.com/residential/2023-top-jumbo-originators/ Sun, 01 Oct 2023 08:00:00 +0000 https://www.scotsmanguide.com/?p=64086 In the most expensive markets, these originators are essential

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Over the past few years, home prices have skyrocketed. And while the market has begun to moderate this year, the median home still costs 26% more than it did in 2020, according to Federal Reserve data. In pricier markets, typical home values shot up and above the $1 million mark — and where there are expensive homes, there are extra-large mortgages.

While Fannie Mae and Freddie Mac update the conforming loan limits each year, many homes in pricier markets still don’t qualify for mortgages backed by the government-sponsored enterprises. That’s where jumbo originators come in, armed with the products and knowledge to make $1 million-plus loans possible for high-end clients.

Jumbo loans have seen a significant increase in popularity of late. In 2020, they represented only 19% of the market, according to CoreLogic data. But in 2022, the jumbo share of the market was 32%, the highest level seen since 2005.

Welcome to Scotsman Guide’s first-ever Top Jumbo Originators ranking. This list focuses on originators who regularly produce these large, nonconforming loans. To create this list, the publication calculated and ranked the average loan size for everyone who qualified for its 2023 Top Originators rankings (based on full-year 2022 origination volume). On the next two pages, you’ll find 100 originators who specialize in serving elite clientele, each with an average loan size of more than $1 million.

These originators appear to value quality over quantity. While the number of loans closed by the Top Jumbo Originators ranges widely, from 25 to 552, the median number of closed loans is 58. The median dollar volume is $77.5 million, good for a median loan size of $1.3 million.

The geographic breakdown of these originators is not unexpected: California dominated the rankings, with 58 of 100 originators based in the Golden State. New York was a distant second with 19 originators on the list, while Texas, Connecticut and Maryland each have three originators.

Many of these originators work for private banking arms — or well-placed branches — of large institutions like Citibank and U.S. Bank, each of which have more than 20 originators in this ranking. But independent brokers are represented too. Notably, Beverly Hills-based boutique brokerage Insignia Mortgage Inc. has four originators in the top 11.

In fact, Insignia broker Romy Nourafchan took the No. 1 spot, with an average loan volume last year of more than $3.27 million. Nourafchan has been building his jumbo business since the 1990s and has a wide base of clients, with loans ranging from $1 million to $50 million and beyond. To learn more about Nourafchan and his business, read his Featured Top Originator profile on Page 18.

Second place went to Ghazal Doustar of U.S. Bank, with an average loan size of $3.16 million. Rounding out the top five are Anish Singla of U.S. Bank ($2.84 million), Damon Germanides of Insignia Mortgage ($2.75 million) and Kevin Cassell of City National Bank of Florida ($2.35 million).

We hope you enjoy this new ranking and find it informative. Feel free to reach out with any questions, comments or concerns. Warm wishes for a wonderful autumn, and as always, thank you for reading.

Midwest cities offer advantages for first-time homeowners

The cost of the first year of homeownership — including downpayment and fees, mortgage payments, homeowners insurance and property taxes — varies widely across the country. Point2, a division of Yardi Systems, recently analyzed the 100 largest U.S. markets to pinpoint the most and least affordable cities for first-year homeownership.

Sixteen cities had first-year costs of less than $80,000, with most of these in the Midwest. Detroit was the least expensive city, with total costs of about $25,000 for the first year, followed by the Ohio cities of Toledo and Cleveland, each under $40,000. Fort Wayne, Indiana, and St. Louis rounded out the top-five least-expensive cities with costs in the $60,000 range.

Conversely, the 15 most-expensive cities had costs that exceed $200,000. California accounted for each of the top-eight priciest cities. Unsurprisingly, San Francisco topped the list with total first-year costs of $390,000. A smaller Bay Area neighbor, Fremont, was not far behind, followed by San Jose, Irvine, Los Angeles, San Diego, Oakland and Anaheim.

Point2 also found that median-income renter households that save 20% of their annual income can take anywhere from four to 24 years to save up enough to cover these first-year costs. Los Angeles had the longest timeline among the cities analyzed, while Detroit had the shortest.

Coastal urban counties have lowest homeownership rates

The national homeownership rate has increased slightly in the past few years, but many counties — especially those in coastal urban areas — continue to lag. A recent analysis from the National Association of Homebuilders found that 2021 homeownership rates ranged from less than 25% in urban counties of New York to more than 90% in suburban and rural counties of Colorado and the South.

Population density has a lot to do with the lower rates in urban counties, the analysis noted. Four counties in the New York City metro area were among the 10 lowest rates in the nation. Bronx County registered a 19.8% homeownership rate. New York County (Manhattan), Kings County (Brooklyn) and Hudson County, New York, each had rates below 33%.

Similar trends can be found on the West Coast. San Francisco and Los Angeles counties have respective homeownership rates of 38.2% and 46.2%. Meanwhile, California counties with less density (including Alpine, Amador, Calaveras, El Dorado and Sierra) hover around 80%.

The 10 counties with the highest homeownership rates in the nation each exceeded a 90% rate. Four of these counties were in the census bureau’s Mountain Division: Colorado’s Elbert and Park counties (92.6% and 91.1%, respectively), along with Storey County, Nevada (96.5%), and Meagher County, Montana (92.1%). Five others were in the states of Texas, Louisiana, Virginia, Alabama and West Virginia.

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Featured Top Originator: Romy Nourafchan, Insignia Mortgage https://www.scotsmanguide.com/residential/featured-top-originator-romy-nourafchan-insignia-mortgage/ Sun, 01 Oct 2023 08:00:00 +0000 https://www.scotsmanguide.com/?p=64135 No. 1 Top Jumbo Originators, No. 20 Top Mortgage Brokers

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Walking the manicured streets of Beverly Hills surrounding his office, Romy Nourafchan spots and chats with his former clients daily. It’s one of his favorite things about his job, and the relationships he’s built have led to countless friendships and connections. He’s visible in his community, and when the wealthy and famous denizens of Wilshire Boulevard and Rodeo Drive need a mortgage, they know who to turn to.

“Don’t pander to the client just to get a deal. If a deal’s not good for a client, I tell them.”

Specializing in jumbo mortgages for high net worth individuals, Nourafchan regularly closes multimillion-dollar loans. Last year, his average loan volume was more than $3.2 million, making him No. 1 on Scotsman Guide’s newest ranking, Top Jumbo Originators. He’s been carving out his niche in jumbos for years.

“My career started in 1990. For seven or eight years, I worked as a broker, then went into banking and worked for big banks and a few smaller banks,” Nourafchan said. “Over this time, my strategy has always been to go after jumbo loans … and continually build my business on higher dollar amounts.”

Now working at boutique brokerage Insignia Mortgage, Nourafchan uses a variety of lenders to meet each of his clients’ unique needs. Regional banks, credit unions, private funds and the private arms of larger banks are all within his arsenal — and he said he’s always expanding his lender repertoire. With smaller banks running low on deposits and pausing loan programs, he has been spending more time recently with sourcing.

“We actually have a good amount of deal flow and we get a lot of referrals, even from other banks,” Nourafchan said. “Our challenge is to continually add new lenders … new private investors, new banks, spending a lot of time on that. Thankfully for us, we know how to do it and how to get them. But that’s challenging.”

Nourafchan said that this year, most of the deals coming through are between $1 million and $3 million. There’s a low inventory of homes in this price range and anything coming onto the market is still getting multiple offers. Homebuyers who can afford these homes would prefer to buy rather than rent, so they’re willing to pay higher interest rates.

Homes from $3 million to $7 million are less in demand but still doing OK, he said, with similar inventory challenges. The high end, however, which involves loans of $10 million or more, has slowed significantly. Inventory is plentiful at this price point, but most buyers just aren’t interested right now. Jumbo loans at any price point often involve complex borrower finances, as high net worth individuals tend to store wealth in assets rather than liquidities. Thankfully, Nourafchan said, he has “the best team in the country” at Insignia to help him process loans.

“When we submit a file to a lender, it’s pristine,” Nourafchan said. “And you know, it’s a flipside too. We know upfront if a loan’s not going to work, which is an even bigger deal. … If we review a file and know it isn’t going to work, we give our honest opinion.”

This honest communication has been key to gaining client trust and referrals. “I don’t overpromise. I’m fair and honest with them,” he said. If a client says they were promised more by another broker, Nourafchan says he tells them to give it a try, but these clients often come back when it doesn’t work out. “Don’t pander to the client just to get a deal,” he said. “If a deal’s not good for a client, I tell them.” ●

Tips of the Trade

Learn how to underwrite a file. Know what an underwriter looks for and understand how the loan works. Be very good at analyzing loans, because that’s the key. You have to be able to understand if the loan will work or not, and why. Continually expand your referral sources — go out there, meet Realtors, join a networking group. It’s work, but it’ll pay off, and it can be fun meeting new people. Deliver what you say you’ll deliver and everything will take care of itself. You’ll soon get a lot of referrals from places you’d never expect.

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Featured Top Originator: Romy Nourafchan, Insignia Mortgage https://www.scotsmanguide.com/podcasts/featured-top-originator-romy-nourafchan-insignia-mortgage-2/ Sun, 01 Oct 2023 08:00:00 +0000 https://www.scotsmanguide.com/?p=64158 Romy Nourafchan of Insignia Mortgage shares his experience as a luxury broker with high-end clients this installment of the new Featured Top Originator video series. Nourafchan, who placed first in Scotsman Guide’s 2023 Top Jumbo Originators rankings and 20th in the Top Mortgage Brokers rankings, was chosen as October’s Featured Top Originator. 

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Romy Nourafchan of Insignia Mortgage shares his experience as a luxury broker with high-end clients this installment of the new Featured Top Originator video series. Nourafchan, who placed first in Scotsman Guide’s 2023 Top Jumbo Originators rankings and 20th in the Top Mortgage Brokers rankings, was chosen as October’s Featured Top Originator. 

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The Allure of Luxury https://www.scotsmanguide.com/residential/the-allure-of-luxury/ Thu, 01 Jun 2023 08:00:00 +0000 https://www.scotsmanguide.com/?p=61481 High-end homes present an opportunity for jumbo mortgage experts

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The housing market has faced extraordinary turmoil over the past few years. As the COVID-19 pandemic took hold, the market turned white-hot as the demand for housing significantly outpaced supply. Naturally, this had a major impact on inventory, which at one point resulted in the average home being on the market for mere days. This frenzy also prompted a sizable spike in bidding wars among active buyers.

More recently, the housing market has slowed somewhat and price growth has cooled a bit. But despite the ravages of high interest rates and inflation, home prices had not declined in any meaningful way as of this past spring. In fact, according to one estimate, the share of homes valued at more than $1 million has nearly doubled since the start of the pandemic to a rate of one in 14 homes.

“The number of million-dollar homes in the U.S. has risen substantially. In 2015, there were approximately 2 million homes worth $1 million or more. By 2021, this figure had grown to 4.2 million homes.”

The availability of jumbo mortgages has helped to fuel the growth of the luxury home market in several ways. For one, it has allowed buyers to access the funds they need to purchase high-end homes without having to rely on personal savings or other sources of financing. This has made it easier for individuals and families to enter the luxury home market, which was previously reserved for only the wealthiest buyers.

In addition, jumbo mortgages have helped to spur the development of new luxury homes and communities. Developers are more likely to take on these projects when they know there are plenty of buyers who can afford to purchase them. The availability of jumbo mortgages has therefore created a virtual cycle in which the growth of the luxury home market has led to more demand for jumbo mortgages, which in turn has led to more development of luxury homes and communities.

Rising values

The number of million-dollar homes in the U.S. has risen substantially. In 2015, there were approximately 2 million homes worth $1 million or more. By 2021, this figure had grown to 4.2 million homes, according to census data. Although luxury home sales plunged on a yearly basis this past winter, they increased from February to March by nearly 50%. The Institute for Luxury Home Marketing expects prices and demand to fluctuate in the near future as the economy shakes out.

Still, the million-dollar home market has grown significantly over the past few years. About 7% of all homes in the U.S. were valued at $1 million or more in January, according to Redfin. That’s down from an all-time high of 8.6% in June 2022, but it’s much higher than the 4.2% pre-pandemic rate. In the areas with the largest numbers of million-dollar homes, the percentage increases have been staggering.

“The primary advantage of a jumbo mortgage is that a borrower can qualify for a larger loan amount, which means they can purchase a more expensive home without having to come up with additional cash.”

The highest concentrations of million-dollar homes are in the states of California, Hawaii, Washington, New York and Massachusetts. In California and Hawaii, about 23% of all homes are worth $1 million or more. In the Pacific Northwest, million-dollar homes are most prevalent in the Seattle area and the surrounding suburbs of Bellevue and Kirkland. In Bellevue, 60% of homes are priced at $1 million or more, while in Seattle, the share is 33%.

While these are eye-popping numbers, there are three cities in California with even higher concentrations of million-dollar homes. In Pleasanton, Sunnyvale and San Francisco, these percentages exceed 70%. With such a dramatic increase in recent years in the number of million-dollar homes, the question becomes, who is buying these homes, how are they being financed and how is this trend affecting the housing market at large?

Wealthy buyers

Of course, buyers come in all shapes and sizes, and their capacity to afford a million-dollar home depends on their personal financial circumstances. For example, an individual or couple might generate a substantial income but not have much in the way of a downpayment. Conversely, a buyer might have a large downpayment while earning less monthly income.

If you assume a standard downpayment of 20% (which amounts to $200,000 on a million-dollar home purchase), then the buyer would have a mortgage balance of $800,000. If you further assume that their mortgage balance should not exceed 25% of their pretax income, then a household would have to generate at least $200,000 annually to support their purchase.

Most Americans do not earn $200,000 or more per year. As a result, there is often a differential in some areas between the number of available million-dollar homes and the number of households that can afford them.

Despite this affordability gap, many housing analysts expect the share of million-dollar homes to continue to grow. They attribute this trend to an influx of wealthy buyers seeking to invest in luxury properties, as well as a steady rise in property values in certain affluent areas of the country.

Financing solution

Every year, the Federal Housing Finance Agency (FHFA) determines the conforming loan limits for mortgages to be acquired by Fannie Mae and Freddie Mac. In 2023, the loan limit for single- unit properties is $726,200 in most areas of the U.S., an increase from $647,200 in 2022.

In designated higher-cost regions of the country, the new ceiling for one-unit properties is $1,089,300, or 150% of $726,200. Practically speaking, in most parts of the U.S., buyers who want to purchase a luxury home ($1 million or more) with a conforming loan are precluded from doing so because of the existing loan limits of $726,200. In all likelihood, these buyers will seek out a jumbo loan to fund their purchase. Jumbo loans exceed the FHFA guidelines and cannot be purchased by Fannie or Freddie.

Even in the designated higher-cost regions of the country, buyers who wish to purchase a higher-priced luxury home (say $1.5 million and above) are also likely to fund their purchase with a jumbo loan, given the new limit of $1,089,300. The primary advantage of a jumbo mortgage is that a borrower can qualify for a larger loan amount, which means they can purchase a more expensive home without having to come up with additional cash for a downpayment or closing costs.

Additionally, jumbo loans often come with competitive rates and some may even have lower rates than conventional loans. That’s because lenders are less exposed to risk since they don’t have to meet certain requirements set by Fannie Mae or Freddie Mac. Here are some other general guidelines for jumbo loans:

  • Minimum downpayment of at least 10%, although some lenders require up to 30%.
  • Minimum credit score of at least 700, although some lenders have a higher interest rate option for borrowers who fall just short.
  • Debt-to-income ratio varies by lender, but it’s typically 38% to 43%.
  • Cash reserves of six to 18 months can be required of the borrower.

For borrowers who need a loan that is higher than the federal limits, who are high-income earners, have extremely strong credit and wish to finance a luxury home (or a home in a highly competitive area), they should seek out a jumbo loan from a qualified mortgage lender. It is the financing option that will most likely make the purchase of their dream home possible.

Favorable conditions

Jumbo loans recently experienced an uptick in borrower demand due to their favorable interest rates, according to Black Knight. The pressures of escalating mortgage rates and the affordability of homes combined to drive down the number of rate locks in February 2023 compared to the previous month.

Actual dollar volume rose, however, because borrowers took advantage of the preferred rates for jumbo loans and adjustable-rate mortgages (ARMs). As rates remain elevated, borrowers have responded predictably by moving toward more advantageously priced offerings. This includes a shift to jumbos, ARMs and other nonconforming products.

Overall, the availability of jumbo mortgages has been a positive development for the luxury home market. It has allowed more individuals and families to enter this segment and has helped to spur the development of new luxury homes and communities. As the real estate industry continues to evolve and grow, it is likely that jumbo mortgages will continue to play an important role in the purchase of higher-priced homes. ●

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Luxury home sales post largest-ever yearly tumble https://www.scotsmanguide.com/news/luxury-home-sales-see-largest-yearly-tumble-ever/ Tue, 14 Mar 2023 21:11:02 +0000 https://www.scotsmanguide.com/?p=60026 Affluent buyers taking wait-and-see approach, according to Redfin

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Luxury home sales recently saw a record year-over-year plummet, falling to the second-lowest level ever, according to Redfin.

Sales of homes within the top 5% of estimated market values fell by 44.6% annually during the three months ending Jan. 31, Redfin reported. That’s the largest drop ever posted, per data from the national brokerage that dates back to 2012.

In some ways, the plunge can be attributed to the gains in high-end home sales during the COVID-19 pandemic. Luxury home sales grew faster than non-luxury sales during the pandemic-era housing boom, with the year-over-year sales jump peaking above 80% in mid-2021, so they have further to fall now. But broader economic conditions have also taken a toll as consumers generally purchase fewer expensive goods, including homes, during times of fiscal turbulence or uncertainty. And with mortgage rates remaining high, that can add tens or hundreds of thousands of dollars to the price of a luxury home, making even affluent buyers reticent of committing to a purchase.

Such buyers also may be reluctant to spend big given the tempestuous state of Wall Street, which just had its roughest year since 2008, according to CNBC. The Dow Jones was down 8.8% annually in 2022, while the S&P 500 lost 19.4% and the Nasdaq dove 33.1%.

“Uncertainty is the main factor driving the luxury market slowdown in Los Angeles,” said Alin Glogovicean, a Redfin Premier real estate agent based in Los Angeles. “If you’re investing millions in a property, you want to make sure it will hold its value. Most luxury buyers and sellers are thinking, ‘Let’s just wait and see what happens to the market. When it stabilizes, we’ll be ready to go.’ Everyone is kind of at a standstill.”

Many luxury home hubs saw a big slippage in high-end home sales during the three months ending in January. Miami saw the largest sales dip, with a year-over-year slide of 68.7%. Nassau County-Suffolk County, New York (Long Island) followed with an annual decline of 62.6%, with a trio of affluent California cities — Riverside, Anaheim and San Jose — making up the rest of the top five. These cities posted year-over-year sales decreases of 59.8%, 59.3% and 59%, respectively. Luxury markets in such cities were already among the priciest in the country, and all five saw disproportionate luxury sales growth earlier in the pandemic, so high-end sales are likely normalizing from unsustainable levels, per Redfin.

Despite the pullback in sales, prices of luxury homes are still hovering near their peak. The median sales price of these homes jumped 9% annually, reaching $1.09 million. The all-time high, according to Redfin’s numbers, is $1.1 million, reached in the spring of 2022.

Luxury home prices have been buoyed by low inventory. The number of luxury homes for sale was up 7.1% year over year in the three months ending Jan. 31 — the largest annualized gain since 2015. But while sales activity has dropped, a key reason for the sizable gain is that supply sank to a record low about a year ago.

Still, financing remains easily within reach for buyers still willing to wade into the housing market’s priciest tiers, said Chen Zhao, economics research lead at Redfin.

“The silver lining for the luxury buyers who are still in the market is that competition is sparse and jumbo loans now often have lower mortgage rates than other loan types, in part because there’s less risk that high-end buyers will default on their mortgages,” Zhao said. “Wealthy house hunters are also frequently offered additional rate discounts from their banks as a perk for storing substantial funds there.”

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With market still in cooldown mode, million-dollar home share dwindles https://www.scotsmanguide.com/news/with-market-still-in-cooldown-mode-share-of-million-dollar-homes-dwindles/ Mon, 06 Mar 2023 23:44:32 +0000 https://www.scotsmanguide.com/?p=59876 Percentage declines from June's all-time high, though still up substantially from pre-pandemic

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With the U.S. housing market still mired in a cooling period, the share of homes nationwide that are worth at least $1 million has declined, according to Redfin.

In June 2022, 8.6% of homes were worth $1 million or more — an all-time high. Since then, however, this share has slowly ebbed and dwindled to 7.1% in January, essentially flat on a year-over-year basis but still higher than the 4.2% share just prior to the start of the COVID-19 pandemic.

That’s according to the Redfin Housing Value Index, a proprietary model that incorporates public records, Multiple Listing Service data and Redfin estimates to approximate the values of more than 99 million properties nationwide.

Per Redfin, some of the decrease from June’s record high is seasonal, considering that home prices usually decrease during the fall and winter. But the latest June-to-January drop is much bigger than the historical norm and points to other factors at play.

With mortgage rates hovering near 6.5%, homebuyer demand continues to be uneven at best. This is pulling home prices south, meaning that a number of homes that would have fetched seven figures during the peak of the pandemic-era housing boom have dropped below the million-dollar threshold.

On a geographical basis, the share of homes valued at $1 million or more has fallen fastest in expensive coastal regions, with the Bay Area seeing the fastest contraction. Slightly more than 80% of homes are worth seven figures in San Francisco, the highest percentage among the 99 largest metro areas in the U.S. But this share has fallen rapidly and is down from 86.3% at the start of 2022.

Neighboring cities in the Bay Area have seen similar slides, including Oakland (44.8% in January, compared to 50% one year prior) and San Jose (79.2%, down from 81.7%). Other pricey coastal cities with similar decreases include Seattle (27.5%, down from 30.9%) and New York (29.5%, down from 32.5%).

The declining share of homes worth at least $1 million hasn’t been a bellwether for homebuyer relief at large, according to Redfin.

“Home values are coming down from their peak and fewer sellers could fetch seven figures, but that doesn’t mean buyers are getting a break,” said Chen Zhao, economics research lead at Redfin. “The typical homebuyer’s monthly mortgage payment is even higher than it was when home values peaked in the spring because rates are so much higher and although home prices have come down, they certainly haven’t crashed.

“Now isn’t the time for buyers who need to take out a loan to get a good deal. Buying an $800,000 home today would cost more per month than buying a million-dollar home a year ago.”

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