The question many real estate agents and brokers are asking their well heeled clients these days is, can you avoid crossing the $417,000 dollar mortgage line on your new purchase. That is the dividing line between a conventional loan and a jumbo loan. With the difference right now between a jumbo loan and a conventional loan almost a full point, and that is if you can find and qualify for one, borrowers on the top end are finding that coming up with the additional down payment can be in their long term best interests.
The course they take can have deep implications for the mortgage industry, the housing sector, and by extension, the economy. If too many potential jumbo-loan borrowers wait it out, chances are the excess supply of homes on the market will swell, further dragging down prices. Home values fell in 15 of 20 large metropolitan areas in the second quarter from a year earlier, according to a report this week from S&P/Case-Shiller.
“Lenders are all putting our collective heads together to come up with a new way to get borrowers into houses,” said Bill McGoey, a senior vice president at American Partners Bank, owned by the thrift holding company Federal City Bancorp of Washington, D.C. “There are tools that we’ve been using forever, but we’ve had to tweak them to suit the current situation.” via delawareonline
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THE REASON FOR TODAY’S HOUSING SITUATION IS THAT BANKERS WERE ALLOWED TO IGNORE THE SAFETY NET RULES ESTABLISHED
AFTER THE 1929 STOCK MARKET CRASH.
BANKS WERE AGAIN ALLOWED TO ENTER THE STOCK MARKET AND SPECULATE WITH THEIR DEPOSITOR’S MONEY USING10% MARGINS THE 20% DOWN PAYMENT WAS REPLACED BY 5% WITH NO INCOME VERIFICATION,COLLATERAL CHECKS RESULTING IN SUB PRIME LOANS AND FORECLOSURES WITHIN A FEW SHORT YEARS.