Bay Area Homebuyers Get a Break: Lower Interest Rates for Jumbo Loans

We all know that the Bay Area has some of the highest home prices in the nation. But did you also know that the so-called “jumbo loans” needed to buy many of these homes come with interest rates that are less than that of smaller “conforming” loans?

It’s true. All summer long, in fact, interest rates on jumbo loans have been lower than what average borrowers pay.

And in some cases, buyers who take out jumbo loans don’t even have to worry about a large down payment or mortgage insurance, according to a recent CNNMoney report.

For example, the average rate on jumbo loans last week was 4.30 percent, compared with 4.39 percent for a 30-year, fixed-rate conventional mortgage, the Mortgage Bankers Association reported.

In some cases, lenders also have reduced their down payment requirements as well, requiring as little as 10 percent, which is about half the normal rate. Some lenders are waiving the private mortgage insurance requirement, too.

Conforming loans — those guaranteed by Fannie Mae and Freddie Mac — are currently capped at $417,000 across much of the country, although in costlier regions such as the Bay Area the maximum loan amount limits are higher.

Fannie Mae and Freddie Mac guarantee mortgages up to $625,000 in San Francisco, Alameda, Contra Costa, Marin, and San Mateo counties and up to $592,250 in Napa County and $520,950 in Sonoma County. Federal Housing Administration loans have higher limits: $729,750 in San Francisco, Alameda, Contra Costa, Marin, San Mateo, and Napa counties and $662,500 in Sonoma County.

In the Tahoe/Truckee region, all conforming loans are capped at $477,250 in Nevada County and $474,950 in Placer County.

Banks are on the hunt for jumbo customers in order to win them over as clients for other banking services, such as retirement planning, Malcolm Hollensteiner, head of retail lending for TD Bank, told CNNMoney. Jumbo borrowers tend to have better track records in repaying their loans and have lower default rates, so more banks are willing to take the gamble on them.

CNNMoney also reported that many banks have lowered their credit standards for jumbo loans in 2014, Many jumbo borrowers used to need at least a 700 credit score to qualify, but some lenders reportedly are considering applicants with credit scores of 650.

If you are in the market for a mortgage, take a look at these helpful mortgage tips, posted on Pacific Union’s blog earlier this year.

And if you plan to buy a home in the Bay Area or the Tahoe/Truckee region, Pacific Union’s mortgage partner, Mortgage Services Professionals, can offer loan advice and consultation to help make your purchase a success.

(Image: Flickr/401(K) 2012)

Are Mortgage Rules Tightening? Relaxing? It Depends on Which Lender You Ask.

A survey of mortgage lenders shows a widening gap in qualifying loan standards over the past six months, with small and midsize lenders tightening their credit rules for homebuyers. Large lenders, meanwhile, moved in the opposite direction and made it easier to obtain home loans.

Lenders most often cited “changing regulatory requirements” for the tightened credit rules, according to the survey by federal loan guarantor Fannie Mae.

“Lenders have been trying to find ways to manage their operational costs and meet new regulatory rules,” Doug Duncan, Fannie Mae’s chief economist, said in a statement accompanying the survey results. “They appear to feel cost-constrained and, thus, may be applying more conservative standards in their lending practices.”

No explanation was given for the opposite approach by large lenders, but Fannie Mae said the gap in mortgage requirements by large and small lenders is expected to further widen during the next three months and possibly longer.

Meanwhile, demand for mortgages rose during the second quarter of 2014, and Fannie Mae said that, too, will continue rising.

“These results are broadly in line with other major indicators released recently,” Duncan said, adding that they “support our expectations of a steady but unspectacular rebound for housing during the second half of this year.”

For homebuyers, the mixed mortgage outlook drives home the importance of planning ahead and securing financing before shopping for a home.


If you plan to buy a home in the Bay Area or the Tahoe/Truckee region, Pacific Union’s mortgage partner, Mortgage Services Professionals, can offer loan advice and consultation to help make your purchase a success. 

(Image: Flickr/401(K) 2012)