On March 11, The Boston Globe reported on something I told you about in February. The changes in the loan environment are big news for buyers. Count on me to keep my ear to the grapevine for things that really matter, in dollars and cents, for home buyers.
What is happening, in general, is that it is getting harder for entry-level buyers and only a little easier for those who have more money. The small down-payment loans are mostly not available, neither are loans structured to avoid PMI (mortgage insurance which pays the investor if you sell short or foreclose), and PMI standards are getting stricter. Meanwhile, it is cheaper to borrow larger amounts of money, since the limit for a “conventional” loans was raised, temporarily, by about $80,000. However, these new jumbos are not a free pass; the restrictions many. They are not designed to bail out those who are on the brink of selling short:
1. You need high credit scores, 700+
2. These loans are only for purchases, or to replace a purchase mortgage; you cannot refinance to get cash back, or to pay off home equity/second mortgages that you took out after your initial purchase. Owners can borrow 75% of their value, no more.
3. Second home refinances to get the new jumbo rates lends up to 60% of the value of the property, so you need to have 40% equity.
4. 2- and 3-family home limits are unchanged. 2-family limit is $533,850 and 3-family is $645,300.