Jumbo Loan – Low Down Payment
As home values continue to rise and banks loosen their lending standards to a more comfortable degree, more private insurers of mortgages are steadily returning to the market. These private insurers focus on loans and mortgages outside of the conventional reach for Freddie Mac and Fannie Mae. This enables them to focus on much bigger and pricier loans where there is no competition from these government agencies. To appeal to these bigger, potentially more wealthy borrowers, insurers are lowering their costs and increasing the range of mortgages that they will cover.
These changes happen more and more as the availability and market allows. This gradual return to private insurance represents a shift in the kind of borrower and the kind of credit a lender is willing to work with, and to risk their money. In the past jumbo loan lenders have chased after what one would consider the “best borrowers”, individuals with major cash flow and outstanding credit profiles. In recent years, however, a trend of lenders allowing less appealing borrowers access is emerging in the wake of the federal government slowly returning to its previous levels of coverage.
For borrowers, the return of private insurance can be a blessing or a curse. To most is symbolizes that most lenders will start accepting lower down payments so long as the borrower has insurance. For instance most insurers are normally willing to cover anywhere from five to ten percent of a down payment though this normally is accompanied by some additional hurdles:
- Higher Costs for Adjustable Rate Mortgages are a common problem as private mortgage insurers will often times charge more over a fixed rate mortgage, this is because the changing interest rate makes them “riskier”
- An increased number of factors; which determine how much a borrower will pay. Everything from the property location, to the number of borrowers on the lease can alter the price point.
- Built in fees may also be a problem as some lender will purchase insurance o their own but will pass on the cost by including fees or even raising the interest rate slightly, this should be looked for in mortgages with less than twenty percent down.