Since the housing market is returning to a healthier condition, investors are increasingly taking notice of the high-end of the market which includes borrowers who use jumbo mortgage products. On the rise in this sector are more underwriting approvals and loan closings, while on the down side the minimum credit score to qualify for non-conforming loans has eased downward which are both positives for borrowers.
“About 1-2 years ago, you wouldn’t be approved unless you had a 720 or a 740 credit score,” says Stan Bouknight, a loan officer with American Financial Network in Lake Forest. “Markets can change quickly and today, with just a 700 credit score, you can get jumbo financing. And lately, more programs are coming out that allow less than that.”
Following the housing boom era, builders and mortgage companies were alleged to be too closely knit which ended up in borrowers having to pay extra for the same services that others did not.
Luxury home builder Toll Brothers’ lending business just announced they stretched out its rate lock offer for jumbos to 270 days, raised their rate lock options from 120 days to 270 days for jumbo financing. Moreover, TBI reduced their down payments requirements for mortgages as high as $1 million from 20% down to as low as 10%, although those borrowers are obligated to pay private mortgage insurance.
As the market heats up, new lenders will come out of the woodwork so it is highly recommended to shop around for the best rate and terms, not just with the builder whose primary function is “to build homes”. Bill pointed out that there are other niche programs without PMI with mortgage bankers who have strong relationships with banks and investors.
Here’s another tip to watch out for:
Lending divisions of home builders usually pull rates from your normal everyday banks and then resale those loans they close. Historically, they may not always provide the best loan product or rate. Additionally, your separate lender may be more vigilant when it comes to overall construction of the home if there are items that require attention when appraised while the lender with close ties to the builder may waive the need for such approval.