Fixed Jumbo Mortgage: Jumbo Mortgage Rates to Record Lows on Economic Woes
By: Jeff Bowman
Feb. 1 (FreeRateUpdate.com) — The gloomy economic reports during the month of January has created an excellent opportunity to refinance into a fixed jumbo mortgage or as a prudent option for a new home purchase this spring. Jumbo rates had some back-forth movement, but overall the trend was for increasingly better 30Y fixed jumbo rates. The trend was most impacted by very tough economic news on a variety of fronts. The latest Case-Shiller Index numbers showed home prices still under pressure in most markets, retail sales disappointing(consumers are saving or unemployed), continued unemployment above 10% and the list can go on but we don’t have enough wine or anti-depressants for everyone in the room. The bad economic news, and very real concerns about the commercial mortgage market in the US has caused banks to seek the safety of solid jumbo loans.
Banks have to lend to make money. Above all, you have to pay the depositors and to keep the lights on. The previous places to allocate bank capital have been the last places a prudent risk officer would suggest today to the lending products group. Construction lending is dead, commercial is barely alive beyond plain vanilla ultra-safe refinances, home equity lending is available but the masses no longer have the 20-30% equity that is required now and business lending is a tough proposition given that small/medium size business are under very real financial strain due to sharp drops in revenue.
The push for somewhere to put all the government and depositors money has lead management to determine that lending on solid jumbo loans is the place to be in a risky lending environment. This has resulted in the lowest fixed jumbo rates in history. Jumbo Mortgage money is on SALE. Fixed 30Y rates are currently 5.75% and 15Y Fixed Jumbo Loan rates are at 4.375%.
As always there is the fine print. These programs are available to prudent borrowers with 20-30% equity, 6-12 months of payments in savings/investments(401k, IRA), 720+ FICO scores and low debt to income ratios. About the income side, underwriting is looking out for lost bonuses, furloughs, and compensation cuts of any kind as an on-going issue hurting the household cash flow. Exceptions are granted here and there but we all read the news of Wall St bonus cuts, this city/state is cutting payroll and the big AD agency is reducing compensation. With strategic defaults, walk-aways, a large overhang of luxury homes hitting the market this spring; an underwriter needs to show risk management that this borrower will weather the economic storm. Having a solid income and a great FICO is a start but the behavior of others creating a 12% delinquency(over 60+ days late) rate for jumbo loans has bumped up the equity requirement to refinance and purchase.
I think this is healthy overall but for those “waiting till later” to refinance should wake up and put this on the weekend to-do list. I can’t stress enough how important your home equity is to your ultimate jumbo loan approval and the interest rate you receive. Consider your local housing market, your neighborhood and your risks. We speak to people every day that could have refinanced without writing a check at closing but chose to wait in 08 or 09. Their equity declined when the guy two blocks down foreclosed or the golf course development was forced by their bank to have a fire sale on the last remaining units this winter. These crush comparable property values as an appraisal is a snapshot of what your home is worth TODAY to a willing/able buyer.
With the fire sale of assets causing luxury real estate markets to implode(check out Newport Beach, CA or Manhattan, NY prices are back to 05 or earlier) and very probable future increases in the rates of LIBOR based ARM loans; doing nothing and going about your day to day life is not an option. Get your financial house in order as this ride will last many more years. Later this week I will break out the HUGE gamble people with an ARM are taking by not locking in a fixed rate or a new ARM that meets their particular needs.
Have a prosperous day.
Mr Jumbo Mortgage