Jumbo loans a problem for even Microsofties with good credit

[Puget Sounder]

http://seattletimes.nwsource.com/html/b ... mbo26.html

"By Elizabeth Rhodes

Seattle Times former real estate cheerleader

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."

"Borrowers with good credit scores, good jobs and a down payment still have ready access to 30-year "conforming" loans — those funded through banks and mortgage brokerages by Fannie Mae and Freddie Mac, the giant federally chartered companies that fund the bulk of the nation's mortgages.

But Fannie and Freddie cap their loans at $417,000, which means that banks and mortgage companies must tap other sources, such as mortgage-backed securities, for jumbo funds."

[Puget Sounder]

Take this into consideration as well:

"

Let's do the math | Jumbo loans start at $417,000. If the buyer has a 20 percent down payment, a house priced at just under $525,000 would require a jumbo loan anywhere in the Puget Sound area. Here are more facts about the local housing market:

7,584 houses for sale Aug. 24 priced over $524,999 in King, Snohomish and Pierce counties

679 condominiums for sale Aug. 24 priced over $524,999 in King, Snohomish and Pierce counties

8,731 houses sold so far this year in King, Snohomish and Pierce counties priced over $524,999

1,105 condominiums sold so far this year in King, Snohomish and Pierce counties priced over $524,999 Source: Windermere Real Estate"

Doesn't that look like about 10 months work of inventory for houses priced over $524k in King/Snohomish/Pierce?

[jillayne]

Hi Puget Sounder,

Thanks for the stats. What would be interesting to add into the mix, would be the following: out of the 8731 homes sold so far this year over 549K, what was the average downpayment?

Now buyers are going to have to come up with 20%.

[perplexd]

I suspect it has been almost never more than 20% if you look at the last 5 years. In the past few years why would you want to put your cash into the home and save yourself 5-6% in [deductible] interest when you could put it into the market for 8-10% returns instead?

This is what I hear all the time from people less fiscally conservative than myself (which is almost everyone I know).

Now that may all be turning on its head since jumbo rates are higher than standard rates and the market returns don't look so safe as they did just a couple of months ago. For those who have a large downpayment possibility, putting it into the house to get the loan below $417k and securing a savings on interest might seem a lot better than playing the market with it for now.