New Challenge for Jumbo Loans

Will It Be Harder to Get a Jumbo Loan?
The high price of Massachusetts real estate means that it is not unusual for buyers to turn to jumbo mortgages for financing. Jumbo mortgages are loans that are larger than the “conforming limit” – the maximum loan amount that qualifies for government backing through Freddie Mac and Fannie Mae.The conforming limit varies by county. In many areas of the country, jumbo mortgages are any loans in excess of $417,000. In higher priced markets, the conforming limit goes up. For example, in Middlesex County the limit is about $465,000.

Jumbo mortgages are more expensive than conforming ones. Rates are typically 1/2-3/4 a percentage point more than on conventional fixed rate loans. The higher rate compensates lenders for taking on greater risk. Since jumbo loans typically can’t be sold on the secondary market, lenders usually keep them in their own portfolios.

The jumbo market dried up in the recession but had started to regain energy. Now there is a concern that the new qualified mortgage rules issued by the Consumer Financial Protection Bureau could deal the jumbo market another blow.

The new rules prevent lenders from issuing loans to borrowers who can’t afford them through some stringent requirements for “qualified mortgages”. Lenders of qualified mortgages are protected from lawsuits filed by borrowers. The Wall Street Journal reports that two key criteria mean that some jumbo mortgages won’t be considered qualified:

  • Interest-only loans aren’t considered qualified, yet about 14% of jumbo loans start out as interest-only
  • A borrower’s total monthly debt payments may not exceed 43% of his or her income on a qualified mortgage. This restriction would exclude about 15% of jumbo loans. Often jumbo borrowers have considerable assets, but steady income that is hard to document because they own businesses or are self-employed.

If a jumbo mortgage does not qualify under the Consumer Financial Protection rules, a lender will not receive immunity from lawsuits. The big question is whether they will decide the risk is too great and tighten the reins on the jumbo market. The impact may not be felt in today’s cautious lending environment, but the new rules could affect the market in the future.

Want to know more? Please give me a call at 617-965-1236 oremail me for information or help.

March’s Home Value Improver

Quick Home Makeovers

After a tough winter, it’s time to celebrate spring’s arrival!House Beautiful offers these fast and easy spring makeover ideas for your home:

Paint Your Front Door – Welcome the season by refreshing your front door with a new color and a seasonal wreath.

Create a Colorful Entry – Clear the clutter and greet guests with eye-catching storage that lifts the spirits.

Reorganize Bookshelves – Create visual interest by sorting books by color or arranging them artfully in both vertical and horizontal stacks.

Style your Closet – Take advantage of the change of season to give your closet a facelift. Wallpaper the inside for a fun change of pace and arrange your spring clothes by color for an artistic touch.

Paint the Ceiling – Who says a ceiling has to be white? Try painting it a very pale blue or gray to make you feel as if you are looking up into the sky.


Refinancing in Cautious Times

Customer Story: Refinancing in a Cautious Climate
John had a good salary, perfect payment record, he wasn’t underwater on his mortgage – but he couldn’t get a lender to refinance his home. John needed to refinance to remove his ex-wife from the mortgage as a term of his recent divorce. Yet his new alimony obligation was part of the reason why three lenders had turned him down.

“I work for salary plus bonuses. Lenders couldn’t fit my bonuses into their formula so they didn’t count them as income,” John explains.

John turned to Westchester Mortgage for help. We located a lender who could count the bonuses – and then the real work began.

First, John needed to provide three years worth of complete financial records. Then his 1830s home tripped up appraisers and resulted in falsely low appraisals. Next, the lender found John’s name in a deed for undevelopable land in Connecticut that he had received from his father. That discovery led to a round of title searches and reviews of tax records. Finally, so much time had passed since the beginning of the process that the lender pulled John’s credit report again. The report reflected an unpaid gas bill for a statement that John had never received. John paid the bill and was then was required to jump through hoops to provide proof of payment.”

From start to finish, the process took 4 ½ months. “Debbiereally earned her money on this one,” John says. He adds: “My advice is to batten down the hatches unless you have a very simple financial situation. It’s going to be a long, drawn-out process.”

February’s Home Value Improver

Prepare Your Home for Snow

Let’s keep our fingers crossed that we don’t experience another snowstorm like the blizzard earlier this month. If we do, are you prepared? The Institute for Business and Home Safety (IBHS) says that heavy snow accumulation is the biggest threat, both as it builds up and as it melts.

IBHS recommends that every homeowner take the following steps:

  • Watch for snow accumulation on the leeward (downwind) side of a higher-level roof, where blowing snow will collect. For safe removal that won’t endanger you or damage your roof, consult a roofing contractor for a referral.
  • Remove snow from basement stairwells, window wells and all walls. Melting snow can lead to water damage and moisture intrusion.
  • Keep your attic well ventilated to maintain a temperature close to that of the outdoors to minimize the risk of ice dams forming. A warm attic melts snow on the roof, causing water to run down and refreeze at the roof’s edge, where it’s much cooler. If ice builds up and blocks water from draining, water is forced under the roof covering and into your attic or down the inside walls of your house.