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Texas Home Owners Leaning Toward Jumbo Loans

05/21/2015

Compared to other expensive housing markets in the country, high-end homes in Texas are more affordable. Because of this, many borrowers are in a position to purchase larger properties but also qualify for jumbo loans, which consist of mortgages of more than $417,000.

Because of this, the Texas luxury real estate market is on fire. From the latter part of 2013 to the end of 2014, median home prices in Texas appreciated as high as 10 percent, compared to 6 percent throughout the rest of the country.

In Texas, developers did not overbuild before the recession and in fact, overbuilding is still not being done. As a result, the state was not affected by sharp price drops as other states were during the housing market crisis. As stated by Lawrence Yin, chief economist with the National Association of Realtors, more construction would actually be better for buyers at this time.

Affordability in Texas

Compared to high-end homes in other parts of the United States, homes in Texas are still considered affordable, especially for larger properties. Because of this, a significant number of buyers qualify for jumbo loans. In Austin, Texas, which is the state’s priciest market, the median price for an existing home is $240,700, which represents more than a 10 percent increase year-to-year. However, the price of Texas homes is 35 percent less than San Francisco California with a median price of $737,600.

Even in the Dallas / Fort Worth area, the median price was $188,300, a 9 percent increase whereas in Houston, home prices averaged $198,400, a 9.3 percent increase year-to-year. Since the upper limit for loans backed by the government in Texas is $417,000 opposed to $625,500 for several other areas of the country, the number of people taking out jumbo loans is expected to climb.

According to NexBank, a lender based in Dallas, business in Austin, Dallas, and Houston is thriving. The average jumbo loan with NexBank is $500,000 in Texas, which accounts for the $100 million volume of jumbo loans for the state over the past year, this according to S. Matt Siekielski, executive vice president and COO.

Among borrowers of jumbo loans in Texas are business executives, lawyers, doctors, professionals, and even self-employed small business owners. When looking at the portfolio of buyers in California versus Texas, there really is no difference with the exception that buyers get more home for the money in Texas.

Jumbo Loan Borrowers

On average, Texas borrowers of jumbo loans with the Bank of America are 42 years of age, have excellent credit, have stable income, and make a minimum down payment of 20 percent. Rather than refinances, roughly 75 percent of the bank’s jumbo business for the state was actual purchases.

In Texas, few borrowers have trouble qualifying. In fact, homes in Austin with a price tag of $1 million or more are receiving offers from multiple interested parties because of limited inventory and extreme affordability. Even homes that cost upwards of $3 million are only on the market for a very short amount of time. In addition to large homes, buyers in Dallas have the ability to afford land.

John Walsh, CEO of Total Mortgage in Connecticut is optimistic that like Texas, his state will recover fast since it was not hit hard by the recession. However, Texas appears to being doing well in both good and hard times. Specific to the dollar amount of jumbo loans, Texas ranks third just behind California and New York.

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