What is going on with Jumbo Mortgages in Charlotte?

by Tom Tousignant

in Blog, Home Buying, Mortgages, Refinancing

A frequent question I get – what is the Jumbo Mortgage market like?

Over the past year, those who qualified for loans that conformed to Fannie Mae guidelines (Conforming loans), saw very low interest rates and pretty streamlined approvals – you just needed to have documented income, a down payment of 3.5% to 20%, and a credit score over 620. 

Jumbo loans in Charlotte and the Carolinas are very different however.  Banks are actually lending for Non-Conforming loan amounts, but they are actually acting like it is their money they are lending!  If you were going to lend someone $500,000 to $2,000,000 to buy a house, what would you want from them?

Banks are pretty unanimous in their answer right now. They want:

  • Large down payments – share the risk of ownership with the home owner
  • Great credit scores and credit history – only lend to someone with a history of paying back their obligations as agreed – on time.
  • Documented Income showing the ability to repay the loan – if the IRS doesn’t think you made the money, the lenders won’t either.
  • What is the house really worth?  Expect  a strict review of the appraisal, and the lender may even require two separate appraisals.
  • Lastly, the banks prefer that you also share the risk of future interest rates – this means they will offer much better rates on Adjustable Rate Mortgages than on Fixed Rate Mortgages.

As an example, right now we have a lender that is offering a 5 year fixed rate mortgage with an interest rate of only 3.75%.  The not so fine print is that you need 25% down payment (share the risk of ownership), a 680 or better credit score, a two year income history that shows your new mortgage payment and all other debt payments will be less than 45% of your pre-tax income.

Change this loan to a 30 year fixed rate loan, and the interest rate jumps to 5.875% – and you need at least a 700 credit score.

Reduce the down payment to only 20%, and the rate jumps from 3.75% to 4.75%!

Jumbo mortgages are still available, and pretty easy to get.  Just remember that the lender wants you to share the risk by making a larger down payment and everything else needs to be ‘clean’ – credit history, income, property value.  For the right person, a 3.75% 5 year fixed rate makes the right house very affordable.

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