Home buyers may face stricter credit score requirements and larger down payment or higher cash reserve requirements if trying to qualify for a supersized mortgage. Lenders reportedly are growing stricter about granting jumbo mortgages, CNBC reports.
Jumbo mortgages, also known as “nonconforming loans,” allow buyers to qualify for higher loans to purchase homes, typically in more expensive areas. In many areas, for 2020, the lending cap is $510,400, but in some pricier areas of the U.S. that can stretch up to $765,600.
But some borrowers are reportedly struggling to qualify as banks tighten up during the pandemic. “It is truly a problem in the real estate market,” Al Bingham, a mortgage loan officer with Momentum Loans in Sandy, Utah, told CNBC.
Prior to the pandemic, investors or banks mostly backed the jumbo mortgage market by purchasing loans they originated. But the secondary mortgage market has tightened as it faces a lot of unknowns as the pandemic continues.
“There are fewer investors interested in buying those loans,” Mike Fratantoni, chief economist at the Mortgage Bankers Association, told CNBC. That means lenders then will need to keep those jumbo mortgages within their own portfolios, which could carry higher risk.
For buyers needing a jumbo mortgage or a homeowner wanting one to refinance, they may face more hurdles and higher requirements to get one, mortgage experts warn.
For example, banking giant Wells Fargo has actually done the opposite, easing up on jumbo requirements for its existing customers only who want to refinance. However, Wells Fargo is requiring new customers to transfer $1 million or more in assets to the bank to be eligible. The bank notes this does not apply to jumbo mortgages for home purchases.
Mortgage experts advise home shoppers and refinancing customers alike to shop around, as the requirements can differ drastically for requirements for a jumbo mortgage from one lender to the next.
Source: “You Might Have a Tough Time Getting a ‘Jumbo Mortgage’ During Pandemic. Here’s What to Expect,” CNBC (July 13, 2020)
