Lenders are slowly and selectively starting to underwrite jumbo mortgages again after all but abandoning the market as the pandemic got underway.
Since February 2020, jumbo-mortgage originations have plunged 57%, according to data from the Mortgage Bankers Association (MBA).
The once-robust market for jumbo loans, and some other types of loans, collapsed at the onset of the pandemic. Lenders worried about the ability of borrowers to repay their loans as unemployment skyrocketed.
Yet despite the tightening of the overall jumbo market, there’s a segment of the population receiving jumbo or near-jumbo mortgages, said Joel Kan, MBA’s associate vice president of economic and industry forecasting.
“Those who are creditworthy [who have high credit scores] and meet the larger loan balance are still able to find some jumbo loans out there,” says Kan.
What kind of borrowers are getting jumbo loans? It takes excellent credit — generally a FICO score of 800 or above — and a down payment of at least 20% to get a jumbo mortgage right now.
“The folks getting these loans are those who weren’t impacted, or as impacted, by the pandemic in the sense of getting furloughed or laid off,” says Kan.
Along with rates on conforming mortgages, rates on jumbos have been steadily declining.
The average rate on a 30-year, fixed-rate jumbo mortgage is currently 3.81%, according to Bankrate’s weekly national survey of mortgage rates.
Notably, you will pay more right now for a jumbo mortgage (if you can get one) than you will for a conforming loan. But that hasn’t been the case for several years.
Since mid-2013 up until early this year, jumbo-loan rates remained lower than conforming rates, according to the MBA. Now that’s flipped.
This reverse further points to market tightening and the overall availability of cash to lend on the part of the banks, says Kan.
With the lower rate for conventional loans, it might make sense for people with the financial means to make a down payment on their home that’s large enough to bring the loan into conforming territory.
This would also ease the burden of meeting the more-stringent credit and debt ratios that many jumbo lenders are requiring.
Another avenue worth exploring: Find a mortgage broker who specializes in jumbo loans. These brokers may be able to save you time and money in your search.