There have been recent reports that certain products have changing guidelines, and that some loans are becoming harder for homebuyers to qualify for. But you should be careful what you read, according to Jon Goldman and Matt Kennedy, senior mortgage consultants with Wintrust Mortgage.
“On the Internet, there are reports that buyers need to put 20, 30 and 40 percent down to get deals done, but there’s misinformation out there,” Kennedy says. “Every scenario is worth a conversation. There’s a way to find a home for pretty much any buyer.”
Bold words, but with changes in requirements for existing products, like jumbo loans and condo loans, there are, in fact, more buyers who can qualify for more products than before. Both types of loans have had their guidelines loosened a bit in the past year:
With jumbo loans, there are some investors that only require one appraisal on purchase transactions of more than $1 million.
Ninety-five percent loans can be done on purchases of lower amounts, like $650,000.
Two or three years ago, a 95 percent jumbo adjustable rate mortgage was unheard of because the secondary market was not open to buying these loans. Now that the secondary market has improved, this product type is starting to see more availability.
For condo loans, there are situations where down payment options are becoming more lenient. “We’re seeing people surprised to hear that they can get a loan with just 3 to 5 percent on a condo that is not FHA,” Goldman says. “We’re starting to see 5 percent down be pretty common, but the building dynamics need to be pretty solid – the building needs to be financially strong and the association needs to have proper reserves and owner occupancy.”
In addition, there are some products available now that were not available three years ago, Goldman adds, as well as some programs to help homebuyers. In terms of products, Goldman and Kennedy say condos that are classified as warrantable give buyers a bit more flexibility when it comes to qualifying for financing in that building.
Warrantable condos, Goldman says, are handled separately from non-warrantable condos, and because of this, they come with their advantages. “Warrantable condo loans are aggressive with pricing – there is generally about a quarter of a price difference with warrantable and non-warrantable loans. Loans are available for both, but warrantable condo loans typically have better pricing and are more flexible with down payments and other underwriting criteria.”
With warrantable properties, banks get money back on loans for those properties, and these types of loans are starting to see more traction, even in terms of jumbo loans; it’s the added guarantee from Fannie and Freddie, Kennedy says, that is the biggest benefit. “Two to three years ago, a 90 percent adjustable rate mortgage on a condo was unheard of because the secondary market was not open to buying loans,” Kennedy says. “With that market coming back, we’re seeing more availability.”
As far as programs go, the Smart Move program through the Illinois Housing Department Authority helps first-time homebuyers get down payment assistance. The program is “lenient” with credit scores as low as 620 and, according to Goldman, could require 1 percent of the homebuyer’s own funds.