How the New Home Loan Rules Affect Jumbo Mortgage Rates in NJ
The fallout from the 2008 mortgage crash is still being felt half a decade later. To prevent a similar economic collapse in the future, the government has enacted new laws to govern how mortgages are handled. These laws may have far reaching consequences for jumbo mortgage rates in NJ.
First, potential homeowners may find it more difficult to qualify for jumbo loans because of the new income restrictions. Previously, borrowers’ debt-to-income ratios couldn’t be more than 45 percent. That rate has been reduced to 43 percent.
The idea is to make homeownership more affordable to buyers. However, about 9 percent of loans issued in 2012 were to people with debt-to-income ratios over the new limit. Banks may be more leery of issuing large loans to customers in this group, now, because any loan that does will not be considered a qualified mortgage; a classification that’s required to sell mortgages in secondary markets.
Another issue that can affect jumbo mortgages is banks are required to keep origination fees at or below 3 percent. The cost of servicing larger loans may exceed this limit and banks may impose higher jumbo mortgage rates in NJ to compensate for the lost revenue. While the restriction was put in place to make it more affordable for people to purchase a home, it may have the opposite effect on people who live in areas where housing prices are high.
Lastly, it’s predicted that a 20-percent down payment will become the new normal for people living in high-end neighborhoods where large loans are typically required to purchase a house. Though homebuyers can still get FHA loans that only require a 3.5-percent down payment, the maximum loan amount has been reduced in many areas. In New Jersey, for example, the maximum amount FHA will loan a buyer for a single-family home in the New York-Newark-Jersey City area is $625,000. However, the average sale price of homes in that market is $783,000. Buyers would need to come up with the difference to qualify for the loan.
If you’re thinking about buying a home, it’s a good idea to research the new mortgage lending laws to see how they will affect the type of home you can purchase.