Looking to purchase a new luxury home this year in the Twin Cities? Most likely, you will be using what’s called a Jumbo Loan to help finance the purchase.
What you need to know is that the rules have changed, thanks to the Consumer Financial Protection Bureau. Effective January 10, 2014, the rules for the jumbo-mortgage market are changing. According to the Wall Street Journal’s Market Watch, here are five changes to expect in 2014:
- Fewer types of Jumbo Loans – interest only loans and those with balloon payments will be hard to find, and will most likely result in a higher down payment requirement.
- Lower Down Payments – the good news is that many banks are dropping the 20% down requirement on large loans, some down to 10-15%. But this might mean private mortgage insurance will come back, an added expense for borrowers.
- New Rules for “non-qualified” loans – Loans that meet the new “qualified” requirements must have no higher than a 43% debt to income ratio. For banks wishing to offer jumbo loans above this mark, they will most likely require higher down payments, and proof of large cash reserves.
- Banks will Push for ARMs – rates on 30 year fixed-rate Jumbo Loans will increase over time, thus causing some banks to promote ARMs (adjustable rate mortgages), allowing them to make more money on higher interest rates once a borrower’s rates reset
- Rate Changes – new rules created by Dodd-Frank will cause investors to pay more for loans sold to them, passing this cost down to borrowers utilizing Jumbo Loans
The video below is a quick snapshot about how the new Mortgage rules will affect the real estate industry this year.