Rates fall, but jumbo loans still playing hard to get |
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The typical jumbo-conforming borrower wants to refinance
out of an adjustable-rate mortgage "and they're seeking the safety
of a fixed," Lepre says.
They pay for that safety: A lot of these
borrowers will pay higher rates on their fixed-rate jumbo-conforming
loans than they were paying on the previous jumbo ARM.
But they'll
have to refinance out of those ARMs anyway, and they're gambling
that fixed rates on jumbo-conforming loans will rise.
That's probably
a wise move, in Lepre's opinion.
FHA helps homeowners who lack equity
The FHA loan limits depend on the cost of housing in each metropolitan area and can range from $271,050 in so-called "normal" markets up to $729,750 in some expensive markets.
"If you want to put down 3 percent or less, your only option today is the FHA jumbo. That's a good product for someone who wants to put a little bit down or wants to put, say, 5 (percent) or 10 percent, down, but is in a declining market," Sillman says.
Homeowners who want to refinance a jumbo-sized non-FHA
adjustable-rate mortgage but don't have at least 3 percent equity
can consider the FHA Secure program, which allows the current lender
to take back a second mortgage to make up the difference between
the amount that's owed and the current value of the home, according
to the FHA's Web site. The higher limits apply to this program as
well.
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| Borrowers who might seek FHA jumbo loans |
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The new loan limits took effect in February and are set to expire at the end of this year unless Congress extends the time period or makes the new limits permanent. The House recently passed legislation that would make the limits permanent, but President Bush has denounced the multifaceted housing bill as a foreclosure bailout and threatened to veto it.
Banks are best bet for super jumbos
Bigger loans, known as "super jumbos," are a specialty product in today's market and are available only from select lenders that choose to offer them. Some lenders are eager to originate super jumbos while others "won't touch" them, says Mike Mueller, a mortgage broker in San Francisco.
Traditionally, some borrowers splintered larger loan amounts into multiple loans to avoid the cost of mortgage insurance. For example, the once-popular "80-10-10" loan program was comprised of an 80 percent first mortgage, a 10 percent "piggyback" that was either a second mortgage or a home equity line of credit, or HELOC, and a 10 percent down payment. This structure is uncommon today because few homebuyers have a large enough down payment to qualify for a second mortgage or HELOC.
That said, a homeowner who wants to refinance a jumbo loan and has substantial equity might benefit from this type of arrangement. An example would be a $500,000 first mortgage, plus a much smaller HELOC on a $1 million house.
Borrowers who want to qualify for a jumbo-conforming or super jumbo loan need to have "an incredible amount of income" and "all their ducks in a row" because the income verification process has become so exacting, Mueller says. Paycheck stubs, W-2 tax forms and income tax returns are routinely required.
Self-employed borrowers face even higher hurdles because stated-income loans have fallen out of a favor along with second mortgages. Today, self-employed borrowers "have to show income" on their Schedule C federal income tax form and profit-and-loss statement, Mueller explains.
"The underwriter is not coming in with one eye closed," he says. "Instead, she has three eyes on it."
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