Jumbo Mortgages Are Cheaper, Easier to Get
September 22, 2014
Wealthy home buyers are paying lower average rates on high-dollar loans (known as jumbo mortgages) and in some cases, they don’t even have to worry about a large down payment or mortgage insurance, CNNMoney reports.
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For the last several months, interest rates on jumbo loans—mortgages that are $417,000 or more (or $625,000 or more in high-priced markets—have been lower than what average borrowers pay. For example, the average rate on jumbo loans last week was 4.24 percent compared to 4.36 percent for a 30-year, fixed-rate conventional mortgage, according to the Mortgage Bankers Association.
In some cases, lenders also have reduced their down payment requirements as well, requiring as little as 10 percent, which is about half the normal rate. Some lenders are waiving the private mortgage insurance requirement, too.
Many banks have lowered their credit standards for jumbo loan originations. For example, many jumbo borrowers used to need at least a 700 credit score to qualify, but now lenders are considering applicants with credit scores of 650, says John Walsh, owner of lender Total Mortgage Services.
Banks are on the hunt for jumbo customers in order to win them over as clients for other banking services too, such as retirement planning, says Malcolm Hollensteiner, head of retail lending for TD Bank. Jumbo borrowers tend to have better track records in repaying their loans and have lower default rates, so more banks are willing to take the gamble on them.
Source: “For Rich People, Mortgages Are Getting Cheaper and Easier,” CNNMoney (Sept. 21, 2014)
Updated: August 07, 2020