Hoping to Borrow More than $417,000? Good Luck!

In Seattle the median price for a single family home is $481,000 so unless you can put about 13% down you’ll need a jumbo loan (which is any loan over $417,000). Well the fallout from the sub-prime lending debacle is affecting some lender’s ability to provide jumbo loans even to well qualified buyers. Elizabeth Rhodes reported this weekend on a Seattle area couple who’s loan disappeared the night before closing on their new home because the mortgage broker had suddenly lost the ability to provide jumbos.

The evening before their home purchase was to close, Gary Becker and his wife, Amy Dacus, learned their mortgage to buy a Woodinville home had evaporated.

Unlike subprime borrowers defaulting on loans, the couple had a stellar credit score, a 20 percent down payment, strong employment history and had effortlessly purchased three prior homes.

But their new home’s $670,000 sales price was large enough to require a “jumbo” loan, so named because it was for more than $417,000, the limit the nation’s largest mortgage backers will fund.

Their California mortgage broker had unexpectedly lost its ability to provide jumbos — an event being repeated by lenders nationwide as the underlying funding for these large loans grows scarcer.

If it’s going to be hard for people in Seattle to get jumbo loans, microeconomics will tell you that when demand decreases and supply is increasing, price will go down.

  • http://www.mortgageporter.com Rhonda Porter

    It’s really not that hard to find a jumbo loan in Seattle. Just don’t ask for a stated income, interest only product with a low down payment.

    The jumbo are slightly higher but historically low and still available.

  • http://seattle.redfin.com/blog/author/marie.hagman marie.hagman

    Thanks Rhonda. Do you know anything about brokers losing the ability to provide jumbo loans? The couple in Rhodes’ article had 20% down which is not a low down payment.

    Do you have any tips on how to avoid getting stuck like the couple in the article?

  • http://www.mortgageporter.com Rhonda Porter

    It looks like my reply did not show up. I’m wondering if the “California Mortgage Broker” was licensed to be a Loan Originator in Washington State. Per our new law, out of state brokers must be licensed in order to do loans in our fine state.

    As a broker, if their LO worked with any of the top lending resources he/she would have been able to close the loan. It just depends on who the broker had relationships with.

    I recommend that buyers get fully approved as soon as possible and once they find their property, lock in their loan. During these times, lenders are looking for any reason to balk on loans that Wall Street has lost their appetite for. I do believe that jumbo financing will come back. Some lenders are all ready seeing that.

    It could also be in the buyers best interest to work with a Mortgage Professional who has access to several different lenders (like a broker or correspondent lender). If you’re restricted to one lender and that lender can no longer fund mortgages, you’re out of luck.