When the COVID-19 crisis began spreading across the United States, prompting government officials to order the temporary shutdown of numerous offices and businesses, the real estate and lending industry was hit hard. Many products were temporarily shuttered; high-risk loans, such as jumbo loans, were limited the most.
Companies like Wells Fargo and Cross Country Mortgage had to make changes, but things are steadily improving, and both are offering jumbo loans in limited forms.
So how do they compare? Let’s take a look at the two options…
The Current State of the Jumbo Loan Market
It helps to take a moment to understand the current state of the market and examine why jumbo loans have been limited.
Because of the current state of the real estate market, many companies are not currently offering jumbo loans. There are signs that lenders will be easing these restrictions in the near future, but the tightening of restrictions, which started around March, is still present. For potential buyers, this means that there are more challenges to purchasing a home, especially if you need to use a jumbo loan.
A jumbo loan is simply a form of financing that is larger than conforming loans. Basically, these loans are so large that they won’t be supported by Fannie Mae and Freddie Mac. What counts as a “jumbo loan” can vary depending on where you live; in many places, anything over $510,400 counts as a jumbo loan, but in higher-priced regions, this number is lifted. Some counties across the country have loan amounts up to $765,600.
But it’s certainly not hard to exceed that amount. In San Diego, the limit for conforming loans is $701,500. This is above the national baseline limit, but anyone who has shopped for housing in the area knows that many home are well above this amount.
Note: Requirements Cited Do Not Represent an Official Offer from Wells Fargo or Cross Country Mortgage
Before we go any further, we must point out that we do not speak on behalf of Wells Fargo, and the information found in this article is based specifically on news sources, which we have linked to below. The numbers cited represent to the best of our knowledge the current offerings from Wells Fargo; details may have changed and as time passes the requirements will be adjusted. For specific information on jumbo loans from either company, you must contact the respective organization.
Wells Fargo Jumbo Loans
Because of the challenges currently found in the lending environment, many organizations are changing their offerings to reduce risk. According to an article from CNBC, Wells Fargo, one of the largest lending institutions in the world, is now requesting that homeowners have at least $1 million in available balances if they want to refinance their current jumbo loan. This, says the article, is four-times the amount they were previously requesting.
This change came from an apparent overhaul of their existing guidelines, which made it more difficult for new customers to attain a loan while lowering barriers for their existing customers.
This requirement, of course, makes attaining a Wells Fargo jumbo loan refinance far more difficult. Even the $250,000 requirement could have been restrictive to many potential buyers, but this requirement means that far more people will not be able to take advantage of the lower interest rates which are currently dominating the market.
According to the article, Wells Fargo is dealing with “dual pressures.” The first pressure is something all lenders and mortgage professionals are dealing with: the reduced economy created by the national response to the coronavirus. This has created financial constraints and uncertainty for many people, causing lenders large and small to be more restrictive on loans. But Wells Fargo is also dealing with punitive measures as well. In 2016, the company was involved in a scandal related to fake accounts. In response, the Federal Reserve has limited the company’s growth and Wells Fargo is unable to enhance their balance sheet.
So if you are choosing to refinance a Wells Fargo jumbo loan, you may have difficulty qualifying, especially if you have less than $1 million in the bank. Also, according to their website “some loans may be temporarily unavailable,” so if you are interested in a jumbo loan for a purchase through Wells Fargo, you may have to wait.
Jumbo Loans from Cross Country Mortgage
Different lending intuitions have different requirements for their products, and Cross Country Mortgage has specific requirements for their jumbo loans as well.
For an owner-occupied purchase, you will need a downpayment of at least 5%, and this requirement can go as high as 20%, depending on how much money you need for your purchase. Regardless of amount (up to $3 million), you will only need 12 months of reserve requirements, which is far less than the $1 million in balances required by Wells Fargo.
If you are using a jumbo loan up to an amount of $850,000, you only need 5% down. This means you need less than $45,000 as a downpayment, and allows you to make a purchase of $894,736.
If you need a loan up to $1 million, the downpayment requirements will begin to grow. At this loan amount, you will need a 10%, and you can make a purchase over $1.1 million while bringing $111,111 in a downpayment.
The downpayment requirements grow again when the loan is up to $1.5 million. At this amount, the downpayment requirement is 15%. With the loan and the downpayment, you can utilize this option for a total purchase up to $1,765,705.
The downpayments once again climb up to $3 million. For loans up to $3 million, you need a 20% downpayment, but you can use this option to make a purchase up to $3.75 million, resulting in a fantastic home that will keep you and your family happy for years.
Cross Country Mortgage is still offering cash-out services on 2nd homes and investment property. As far as we know, bigger banks are not doing cash out on any type of ownership designation.
The Right Team for Your Jumbo Purchase
If you are looking for an affordable jumbo loan, contact our helpful, knowledgable staff today!
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“Chad and his team are exactly who you want handling the financing of your home. Whether it be a new purchase or refinance, he and his team are one of the most professional, responsive group of people I’ve worked with. Buying a home can be very stressful and Chad and his team took all of the necessary steps to make the process as painless and as quick as possible. They are extremely knowledgeable, organized and have great follow through. You won’t ever be left wondering what the next steps are. I highly recommend him and will use him in all of our real estate transactions moving forward.”