Some quick updates on lending and real estate

While states are starting to talk about benchmarks needed to "open,  Portland's real estate market marches on.

Tracking lockbox "opens" can be an early indicator of a changing market.  That is, our electronic boxes allow tracking of how many times lockboxes were opened in a certain week.  Last week, in the Portland area, our lockbox opens were up almost 6% from the previous week.  hmm.

Anecdotally, there are plenty of reports of multiple offers, with listings selling after just a few days on the market.  Tracking pending sales in certain zip codes,  I can see houses switched to pending, in a broad price range.

That brings me to lending.  Lenders are moving pretty quickly to limit their exposure with regard to certain loan types.

 Lending on jumbo loans (in our area, loan amounts above $550,000) is being curtailed.  Some lenders are still offering these loans: mostly banks offering loans to existing customers.  In some cases, banks may be requiring a certain balance of funds on deposit.

Chase Bank is now requiring 20% down and a credit score of 700 or over ,for their conventional loans.  Before the advent of mortgage insurance, all home loans required 20% down.  Consider this a return to tradition.  Other lenders are still offering lower down payment options, and FHA and VA loans are still available.

Most all lenders are being pretty vigilant about employment verification; double checking through the escrow period and before funding the loan for closing.  In addition, some lenders are having employers complete a form with information about borrowers' prospect of future employment.

Get in touch if you have questions about your specific situation or property.

A solution to those spendy jumbo loans

The conforming loan limit in our area is $417,000.  This means, any loan amount above that, independent of how big your down payment is, qualifies as a jumbo loan.  Jumbo loans are expensive with higher interest rates and fees. 

In the boom years, there were a variety of loan "products" available to circumvent the jumbo limit.  As a general class, the second mortgage was the most popular and easiest tool buyers could use to avoid taking out a jumbo loan.   In the downturn, virtually all loan products disappeared but for the most standard of loans; FHA, VA, conventional and jumbo.  As lenders are gaining back some confidence in the market, they have brought back the "second". 

Here is how it works.   The buyer borrows the $417,000 allowed as a conventional loan, and then takes out a second loan to close the gap to their purchase price.  So it would look something like this:

$750,000 purchase price
-$150,000 down payment
$600,000 financed
-$417,000  conventional loan
$183,000 second loan

Now, the interest rate on the second does tend to be higher than that on the conventional loan,  But it is higher only on that $183,000 balance.  Not the whole $600,000, as would be a jumbo loan. 

For some, the jumbo rates and fees were rather prohibitive, such that folks opted not to move, or to use retirement or other savings.  I expect we'll see many "move up" buyers using these loans to facilitate getting them into their next home. 

Is it advisable?  That is, if the jumbo was a financial strain, maybe a move up is reckless.  Or does the second loan, keeping the overall cost lower, make such a move smarter?

Give me a call if you have questions about what loan programs might work for your particular situation.  I'll glad answer what I can, and refer you on to one of the reputable lenders with whom I work.  503-312-8038.