Myth #1: Jumbo loan programs are no longer available, or they’re too expensive.
With the recent turmoil in the mortgage market, it is true that rates on single Jumbo 30 year fixed loans (loan amounts over $417,000) have increased over the past couple months. However, it is still possible to structure your purchase or refinance mortgage using a conforming loan amount for the 1st mortgage, and a home equity line of credit for the 2nd mortgage. Fannie Mae and Freddie Mac are still creating liquidity for loans on single family homes up to $417,000, and the recent rate cut by the Federal Reserve has lowered rates on home equity line of credit. You can therefore get a conforming 30 year Fixed for rates as low as 6%, and a 2nd mortgage with rates as low as 7.25%, both with no points. This can substantially reduce your monthly payment relative to getting a single Jumbo loan.
As an alternative to a 30 year Fixed, there are also 5 and 7 year ARM Jumbo loan programs available with rates as low as 6.125% or 6.25%.
Myth #2: 100% financing is no longer available.
This is absolutely untrue. For mid to higher credit borrowers, 100% financing is definitely still available. While single loans up to 100% are hard to come by, there is availability to purchase or refinance 100% of your property’s value using combo loans. By setting your first mortgage to 80% of the home’s value, and the second mortgage to 20%, you also avoid paying mortgage insurance and thereby reduce your overall monthly housing payments.
Additionally, for borrowers willing and able to put or keep at least 5% of the home’s value as a down payment (i.e. 95% financing), their mortgage options increase exponentially. There is a much greater availability of mortgage products available for homeowners with some equity in their homes, and the rates on these programs are much better. As always, the more money a borrower can put down, their rates will be lower and their mortgage options are greater.
Myth #3: I can’t qualify for a mortgage if I’m self-employed or if I can’t fully document my income.
Again, this is a myth that has become pervasive, especially for new homebuyers. While some states like Ohio and Minnesota have passed laws severely restricting mortgages with no income verification, for the rest of the country lower documentation loans are still widely available. Usually the rates on these programs are slightly higher than full documentation loans, but there is still widespread availability of “stated income” loan programs for borrowers with mid to high credit.
In fact, if a borrower’s credit score is high enough, typically in the mid 700s and above, there is no extra “hit” to rate, meaning your rate could be as low as a fully documentation loan. Stated Income loans are also still a terrific option for borrowers who are self-employed, or have variable sources of income.
Jonathan Strike is the President and co-founder of LoanInsights, a revolutionary new mortgage company with a patent pending technology that directly searches the major lenders’ underwriting guidelines and pricing metrics. The technology helps home buyers to easily find the best rates that they actually qualify for in just a matter of seconds, virtually ensuring the best mortgage deals available. Visit us online.
