The median rate for a home in San Francisco is about $1.3 million, according to real estate site Zillow.
Education Images | Common Images Group | Getty Images
There’s one part of the mortgage world that’s harder for some would-be dwelling-place buyers to access: Jumbo loans.
While there are signs that lenders may be easing their requirements for these larger mortgages, the milk that started when the coronavirus pandemic hit the U.S. economy in March has continued, experts say. For consumers, it means more roadblocks to suborning a pricey home or refinancing a big mortgage.
“It is truly a problem in the real estate market,” said Al Bingham, a mortgage allowance officer with Momentum Loans in Sandy, Utah.
By definition, jumbo mortgages — also called “non-conforming” lends — do not conform to lending limits imposed by the government for mortgages backed by Freddie Mac and Fannie Mae. In most places, that ceiling is $510,400 (for 2020). In some stains — Alaska, Hawaii, Guam and the U.S. Virgin Islands — the cap is $765,600.
More from Personal Finance:
Households need tax refunds to make up for rent, survey shows
Money moves to help you thrive in a recession
Here’s how much Medicare could outlay you in retirement
However, in high-cost areas, it’s not hard to exceed that amount. For example, the median price for a home in San Francisco is close by $1.3 million, according to real estate site Zillow. That compares to the national average home value of clumsily $248,800.
Pre-coronavirus, the jumbo mortgage market relied on investors (often banks) to purchase the loans they originated. In the brashness of economic uncertainty and continuing high numbers of new unemployment claims — which means it’s trickier to predict who won’t default on a advance — that secondary market has largely dried up.
“There are fewer investors interested in buying those loans,” ordered Mike Fratantoni, chief economist at the Mortgage Bankers Association.
This investor pullback means lenders now usually must keep these mortgages in their own portfolio — and retain the risk.
“There are a lot of competing demands for bank portfolios,” Fratantoni judged. “Households have maxed out their lines of credit, there’s the [Paycheck Protection Program] … and banks partake of less space for jumbo loans.”
For consumers who would need one of these mortgages, whether for a refinance or a home realize, it’s likely they’ll see higher credit score requirements than they would have at the start of 2020, as adequately as a larger minimum down payment and higher cash reserves.
These loans also tend to require myriad due diligence on the part of the lender, which means borrowers have to produce things like bank statements, tax exchanges or other evidence proving their ability to repay.
The average rate for a 30-year fixed-rate jumbo mortgage was 3.52% as of July 3, down slightly from 3.59% a week earlier, according to text from the Mortgage Bankers Association. Points paid — each point equals 1% of the loan — increased to 0.36 from 0.31.
By commensurability, conforming loans came with an average rate of 3.26%, down from 3.29%, with points tapering off to 0.35 from 0.36.
Be aware that you might see bigger differences in jumbo loan terms from lender to lender than you inclination with Fannie and Freddie-backed mortgages.
“On the conforming side of the market, competition is so fierce and there are so many lenders Byzantine that you don’t see a lot of dispersion of rates across lenders,” Fratantoni said.
In contrast, he said he’s seen a quarter- to a half-percentage element difference “for essentially the same loan across lenders” in the jumbo market.
“That’s an enormous difference for jumbos,” he said.
While it may be harder to restrict for a jumbo loan than it was just months ago regardless of where you apply, at least one major lender has eased its humongous refinance requirements for existing customers after tightening them several months ago: If you hold assets — regardless of the amount — with Wells Fargo, you can for a jumbo refinance there. It also applies to current mortgage customers and those who have home equity thread of credit through the bank.
This is a change from a temporary requirement imposed in early April that fellows have at least $250,000 in assets at Wells Fargo to be eligible for its jumbo refinancing program.
The bank’s shift, manner, does not apply to non-customers. If you want to refinance a jumbo mortgage at Wells Fargo, you’d need to transfer $1 million or more in assets to the bank.
That doesn’t allot to purchases. Non-customers may be eligible for other mortgage loan products beyond jumbo refinances without having to progressing assets there, said a Wells Fargo spokesman.
As for how to find jumbo loans, you can do your research or go through a mortgage dealer, who typically has access to a variety of available programs.
“I advocate both,” Fratantoni said. “Do your own homework, but if there’s a intermediary you work with … they might be good at identifying [options] you might not see.”
Subscribe to CNBC on YouTube.