Banks start to ease 20% downpayment for jumbo loans

NEW YORK – Feb. 17, 2016 – Banks and other lenders are easing the 20 percent downpayment requirement on jumbo loans.

A minimum 20 percent downpayment became an industry standard for jumbo mortgages following the real estate bust, but lenders increasingly approve jumbo loans with downpayments of 10 percent and sometimes less.

Some mortgage bankers say that younger borrowers have stellar credit ratings and sufficient assets and incomes, but high rents don’t allow them to amass enough cash for a 20 percent downpayment.

Newer loan products from big banks, credit unions and online lenders offer jumbo mortgages with loan-to-value (LTV) ratios of 85 to 90 percent. San Francisco-based online lender SoFi says that high LTV jumbo mortgages account for about 80 percent of its mortgage lending – and 65 percent of its borrowers are first-time homebuyers.

Lenders typically enforce strict qualification rules and charge higher interest rates for borrowers putting down less than 20 percent, with Wells Fargo’s current rates for an 89.9 percent LTV jumbo mortgage about a quarter to three-eighths of a percentage point higher than loans with a 20 percent downpayment.

Source: Wall Street Journal (02/11/16) Martin, Anya

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