Jumbo Loans are Becoming Easier to Get

Jumbo loan rates have dropped to level at or below those of conventional mortgages for the first time in more than 20 years. Typically, a jumbo rate will generally run about one quarter to one half of a point higher than the current rate for a conventional loan. Lenders are changing their way of thinking however, as they begin searching for business from the nation’s wealthier customers.

Wells Fargo began this trend in 2013 when they dropped the typical minimum down-payment from 20% to just 15. Competitors have begun to follow suit with some experts noting that it was a good time to e a jumbo loan borrower. The big banks are the ones who will have the best rates, and borrowers are going to need a minimum 720 credit score to qualify for the money.

Jumbo mortgage rates are averaging right around 4.25% as compared to the typical 4.35% being sought for the 30-year-fixed conventional loan. Those who are seeking a ARM loan can find rates around 2.875%, but borrowers should do so only if they expect to move from the property during the 5-year-fixed period.

Because of the rebound of the housing market, loan origination and approval rates are on the rise, and investors are starting to turn their eyes to the jumbo mortgage sector.

Jumbo Loans are Easier to Obtain

According to financial experts, people that had less than a 740 credit score could not get a jumbo loan, but that’s all changing now as opportunities for obtaining jumbo loans are starting to crop up for credit scores at the 720 level or in some cases, even lower. That doesn’t mean that jumbo loans are extremely easy to get these days, but rather the borrower must have a credit record that is fairly clean as well as a significant savings accounts that are perhaps larger than what would be required of the borrower looking for a conforming loan.

While a jumbo loan is considered one that is larger than $417,000 in most areas, they may start above $625,000 in areas where costs are high. To help entice borrowers to seek these loans, banks like Wells Fargo have lowered the 20% requirement to just 15%, and it doesn’t hurt of course that the interest rate is a bit lower than the typical conventional loan. Another plus for the borrower, is that while most loans with less than 20% down require mortgage insurance, those at 15% under the new terms do not.

Second homes are Easier to Buy

Let’s not forget about the terms surrounding the buying of second homes that have eased as well, so there is a lot of incentive for a borrower to look more closely at the jumbo loan packages that are available to them. Because of the expansion of the guidelines, loans that were once amounting to 70 or 75 percent loan-to-value are now being granted at the 80 percent level up to and including $2 million on second homes.

To put things into perspective, only 16 percent of the total number of borrowers who applied for a jumbo loan in 2012 have been denied access to that money according to LendingPatterns.com while previous to that the denial rate was as much as 30% or more. It seems that the reason behind the trend of more approvals in the jumbo sector is that lenders are now more confident about the values of homes. This is especially true for the houses at the upper-end of values.

It’s the stability of the real estate market that is now driving up the desire of borrowers to buy move-up homes. Because of that, lenders feel more comfortable in loosening up the purse strings.