Why lenders love jumbo mortgage

    by Aditi Bansal

Updated on Friday, September 01, 2017

With all that said, some borrowing standards remain tighter. The lender enthusiasm for this kind of loans still prevails tied strongly to the underwriting standards. Home buyers need to have a great credit score of about 700, and sufficient income and reserves.

tags  #Jumbo Mortgage  #Reduced Down Payments #


The Jumbo mortgage business has continued to thrive for most lenders even if the mortgage activities decline over the years. The Mortgage Bankers Association pronounced that the number of mortgage applications had gone down by May 2017, compared to how it was a year ago.

According to the National Association of Realtors, this drop was as a result of the rising home prices, tight credit standards, and too many cash-only home buyers. Despite all this, the mortgage activity remained stable since the jumbo level remained at $ 417,000 in low priced areas while fetching more than $ 625,000 in numerous higher priced areas.

Why do Lenders Thrive in Hard Money Jumbo Loans?

Jumbo lenders really got the wealthy clients they were looking for. The luxury home buyers took advantage of the new jumbo products to buy more. Additionally, credit availability and low interest rates also helped to provide this positive response. According to, a mortgage information provider, the average interest rates for the fixed jumbo loan was at 4.29% by the end of the week on June 13th, 2017. Because of the competition, more affordable rates as well as the flexible underwriting, that was the best time for a home buyer to shop for a Jumbo mortgage.

Purchase applications for mortgages between $ 417,001 -$ 625,000 went up in May by 2.5%. This analysis was done in comparison with May 2013. The applications for large loans exceeding $ 720,000 dropped by 3%, according to MBA. This is in relation to the yearly loan decrease of 18.8% for $150,000 loans or less, and 19.4% for those between $ 300,001-$ 417,000.

As a result, lenders hope that home buyer can get the chance to fill that gap that has been created as a result of the significant drop in refinancing. The director of economic forecasting in MBA, Joel Kan said that most qualified borrowers had already refinanced the set low rates during the previous year. He also said that profitability is the reason most jumbo mortgages are still on their balance sheets. Meaning, lenders consider jumbo mortgages as safe investments that can be held as opposed to selling them.

An additional factor that makes these lenders thrive is the housing market rebound on the upper end as well as the great client confidence amongst the high-income buyers. The highly paid borrowers recover faster and stronger from recession compared to their low-income counterparts.

For lenders to love Jumbo mortgages, home buyers must love the loans more, hence the positive growth. Below are some remarkable issues considered by most buyers when applying for jumbo mortgages:

Reduced down payments

As lenders compete for jumbo borrowers, some of the lenders have relaxed on the 20% down payment requirement. This was standard the whole of last year. The Bank or America, for instance, did introduce an eighty-five percent loan to value product and the NAVY Federal Credit Union had a zero-percent down payment portfolio loan.

Increased lender and loan choices

To become as competitive as the big lenders, smaller credit unions and banks rolled out new jumbo mortgages. They offered excellent features and pricing like post-purchase loans where a home buyer pays the cash first before applying for the jumbo financing. They also introduced an adjustable rate for the mortgages that have long fixed rate periods.

This page has a focus on Jumbo Mortgage, Reduced Down Payments was shared by Aditi Bansal.

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