Buyers searching for jumbo loans are in luck. A report the Mortgage Bankers Association released Tuesday suggests lending standards are loosening.
Lenders offered slightly more jumbo and adjustable-rate mortgages in July, according to the report from the bankers' group. The Mortgage Credit Availability Index increased by 0.2 percent to 103.9 in July. The index measures mortgage credit by primarily studying borrower eligibility and underwriting criteria.
The report connects the uptick to borrowers seeking jumbo loans — loans ranging from $806,500 to $3 million, according to Pentagon Federal Credit Union, one of the nation's largest — and adjustable-rate mortgages, ones where loans have fixed rates for a set number of years and then change based on market conditions.
"If you look at borrowers taking those loans, it’s better credit quality, more secure employment, and so I think it’s a different type of lending," said Joel Kan, deputy chief economist at MBA. "It’s higher loan value and riskier, but these are also pristine credit borrowers. You might also think some of these borrowers just haven’t moved in the past five to seven years. They have more savings."
Buyers seeking federal loans find it more difficult
Borrowers looking for conventional or government loans with Fannie Mae, Freddie Mac or Ginnie Mae are finding it more challenging, according to the report. Lending activity remains the same or slightly tighter, Kan said, since the Great Recession. Those lending terms remain conservative and risk-averse.
For buyers hunting for properties for under $1 million, what one buys is especially important, said Brad Keck, a real estate agent in Atlanta with Compass. Buyers looking to finance a condo purchase are better off today than a year ago. Lenders are exercising more caution since the collapse of Champlain Towers South in Surfside, Florida. The collapse triggered a wave of regulatory changes in which homeowners associations within condominiums faced new requirements regarding upkeep. The dust seems to be settling now, Keck said, with buyers starting to see more financing options.
The latest trend? Sellers are willing to contribute to closing costs. As the market swings slowly in favor of buyers, owners determined to sell are willing to write off $5,000 to $10,000 toward closing costs.
"Negotiate the closing costs," Keck said. "Down the road, you can refinance, but it’s the best thing you can do to bring a seller to the table rather than a price reduction."
