Though mortgage underwriting rules remain rigid for conforming loans backed by Fannie Mae and Freddie Mac, lenders have begun easing up on their pricier jumbo loan counterparts, reports The New York Times.
More lenders over the last few months have been approving jumbo loans for borrowers who don’t strictly meet “usual” guidelines like income documentation or credit score minimums, but can compensate for what they lack in these areas in other ways, the Times reports.
Jumbo loans are mortgages of $417,000 or higher in most areas, with the nonconforming threshold at $625,500 in pricier markets like New York.
Lenders are “just sort of unwinding the things that might have been overly onerous,” said one Connecticut-based senior loan originator in the article.
While at least two years of tax returns are typically required to document the income of a self-employed borrower, a lender may still approve a jumbo loan depending on a borrower’s track record and if they have significant funds on reserve.
Capital gains from stock have also been considered as income by some lenders, that is, if the borrower who receives stock grants as compensation can show a consistent pattern of cashing them in.
Lenders are seeing these qualified borrowers who don’t fit neatly within the usual underwriting guidelines as an increasingly attractive market, and are starting to get a “little bit more creative,” said one Manhattan-based mortgage banker in the article.
“They’re taking good, strong loans with quality borrowers who have compensating facts to overcome a challenge in credit, income or whatever,” he said.
Read more at The New York Times.
Written by Jason Oliva