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.
CURRENT INTEREST RATES AND CORRESPONDING ANNUAL PERCENTAGE RATES (APR) for the week of 03/01/2010 – Presented byLisa Wells
CONVENTIONAL LOANS: 30 year fixed-5.00%-5.25%….APR Range-5.254%-5.587% 15 year fixed-4.25%-4.5%….APR Range-4.378%-4.685% 5 year ARM-3.875%-4.125%……APR Range-3.362%-3.720% (May increase after consummation)
FHA LOANS: 30 year fixed-4.750%-5.000%…APR Range-5.462%-5.605% 5 year ARM-3.75%-4.0%……APR Range-3.395%-3.625% (May increase after consummation)
JUMBO LOANS – loans $417,001 and higher 30 year fixed-6.5%-6.75%….APR Range-6.647%-7.188% 5 year ARM-5.250%-5.500%……APR Range-4.784%-5.159% (May increase after consummation)
-Adjustable rate loans and rates are subject to change during the loan term. The change can increase or decrease your monthly payment. -Additional loan products, rates and lock periods are available.
MARKET: Mortgage rates are enjoying a nice rally to start the week. When there is uncertainty in the market and concern about foreign governments- the mortgage bonds are the safe spot -this will drive rates down. Lots of economic data coming out this week with potentially the biggest market mover being the unemployment numbers on Friday. The expectation is that 20,000 jobs will be lost and the unemployment number will tick up to 9.8%. If the numbers show more jobs being lost- this will help interest rates move lower- if less jobs are lost- rates will move higher.
The tax credit for first time buyers and move up buyers is coming to an end April 30th. There will not be an extension on this either- simply can’t afford it. Must have a fully executed purchase agreement by April 30th and must close by June 30.
This week the Treasury will auction $84 Billion in new debt supply, starting today at 1pm, with $10 Billion in 10-Year TIP today. If the auction doesn’t attract an appetite for the supply being offered, the Treasury would have to raise the yields on the Notes to attract buyers. And if that plays out, there would be some selling pressure on the entire Bond market, much like we saw a couple of weeks ago after poor auction results.
Also stirring the rumor mill is that St. Louis Fed President James “Raging” Bullard, stated at a conference in Shanghai, that the Fed should keep the Mortgage Backed Securities Purchase Program open beyond the end of March expiration. He went on to say that there is some interest in among other Fed Members to extend the program and that the Fed will be discussing the issue at a meeting later this month. It would be great to hear clear comments from Bernanke only because these statements appear to be the opposite of what the Fed had officially stated at each of the last two meetings-where they clearly stated the program would end. The worse case would be to have these rumors and headlines continue to confuse the market, build hope, but then have nothing materialize. This would cause a great deal of borrowers missing the great opportunity they CURRENTLY have.
CONVENTIONAL RATES: 30 year fixed-5.125%-5.375%….APR Range-5.254%-5.587% 15 year fixed-4.375%-4.625%….APR Range-4.503%-4.81% 5 year ARM-4.0%-4.25%%…APR Range-3.487%-3.845%
FHA Rates 30 year fixed-4.875%-5.125%…APR Range-5.587%-5.73% 5 year ARM-4.125%-4.375%..APR Range-3.77%-4.002%
JUMBO- loans $417,001 and higher 30 year fixed- 7.625%-7.875%…..APR Range-7.772%-8.313% 5 year ARM-5.375%-5.625% ..APR Range-4.909%-5.284%
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All views expressed on the Minneapolis - St Paul Real Estate Blog are those of Jennifer Kirby, and are not to be assumed the views of the Brokerage. Please contact me if you have any questions.
