In contrast to some of the lowest mortgage rates ever is the stark fact that millions of borrowers liken the process of securing financing to being run through the meat grinder. Thus the question I am frequently asked by prospective borrowers, "Is it getting easier or harder to get a mortgage?" As is generally the case with complicated topics, there is no easy answer and the reality is a bit of both.
Lending guidelines and underwriting requirements are far more demanding today than just a couple of years ago. Stated income loans are virtually non-existent and anyone seeking 30-year fixed money at less than 5% must be able to fully document their income and assets. And, within a couple of weeks, current debt-to-income ratios will become more restrictive making it harder for many borrowers to qualify for a mortgage. If you've been pre-approved for a mortgage and are still shopping for a home, you should verify with the lender that your approval is still valid.
On a positive note, we are seeing a return of jumbo loans to the market place. Jumbo loans are those exceeding the maximum high-balance conforming limit of $729,750 that applies to Marin, San Francisco, and San Mateo counties. Last year jumbo loans vanished from most lenders' offerings, or carried prohibitively high rates for those wishing to buy (or sell) at the high-end of expensive real estate markets such as Marin's. Since August of this year we've seen a growing number of portfolio lenders return to the market with very attractive loans and rates for those who qualify. Typically, debt-to-income ratios cannot exceed 40%, large cash reserves may be required, and lenders will want down payments of between 20 and 30%.
Over the past month we've seen an increasing number of lenders offering jumbo mortgages at competitive rates and terms. Given the fact that the mortgage market has been almost exclusively supported by Government Sponsored Enterprises such as Fannie Mae over the past year, the new, portfolio-driven jumbo loans represent a significant turning point for mortgage financing. The growing competition among smaller investors vying for this segment of the market is a strong indicator that the housing market is on the upswing. We are now seeing rates in the low 4% range up to $1 million and low 5% range to $2 million. Great financing is also available up to $5 million.
So, in sum, it is getting easier to secure a mortgage...as long as your credentials are stellar. Rates are at their lowest point ever and there are now more opportunities for jumbo financing than there were last month. Still, high credit ratings are increasingly important and lenders are reluctant to extend credit to borrowers with declining income or questionable employment histories. Whether your financing requirements lie in the conforming or jumbo realm, sorting out potential issues in your loan package in advance will remain essential.
Nicholas Ballard is both a mortgage broker and banker specialized in the residential Marin market. For assistance, please call or e-mail:
Nicholas Ballard: 415-526-1941; firstname.lastname@example.org
Real Estate Financing
CA Dept. of Real Estate #01356374
California Mortgage Advisors, Inc.
CA Dept. of Real Estate #01170868
Redwood Highway, San Rafael