Question: How do you stimulate the housing market, when virtually no one can get a mortgage of greater than $417,000?
That’s the limit on so-called conforming loans in most parts of the country. Bigger loans, called jumbo mortgages, are hard to get and carry significantly higher interest rates and large down payments. The reality for most people is that everything else is cash beyond the $417,000 conforming loan. Try buying a house on that in one of this country’s talent-magnet cities. And what if you have to renovate? From Bloomberg:
“The only jumbo mortgages being written right now have strict qualification criteria both in the credit rating of the borrower and the down payment requirements and they are nearly impossible to qualify for,” Mehl said. “Some lenders quote a jumbo rate but they don’t make the loans.” … Habetz said he had a customer with a 740 credit score who had a down payment of $500,000 on a $1 million home in Easton, Connecticut. The borrower had to wait two weeks for approval when in December he would have gotten the mortgage overnight. “Mortgage lending right now is like wading miles and miles in waist-deep mud,” Habetz said. “It’s so difficult. Jumbo borrowers will be tortured and it’s nothing they should take personally because everybody is getting tortured.”
Expect the housing market to continue in its current zombie state for some time.