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Chris Salese

After reading the title of this column back to myself a few times, I started thinking of French fries.

I know, I’m strange and perhaps hungry.

But then I realized I can’t follow up the “egg play” from my last column with another food analogy, so back to basics on this one.

Let’s get right down to it.

Most jumbo loan investors have been carefully over-managing their credit policy guidelines ever since the financial markets melted down about 10 years ago. By doing such, they have created quite a jumbo sized rule book for you to understand.

For example, in let’s say Napa County, a jumbo loan is typically a loan amount that’s considered greater than $679,650.

However, some jumbo investors will originate loans down to the current conforming loan limit of $453,100 or even lower than this amount depending on their financial objectives in certain market areas.

Either way, the term “jumbo loan” becomes confusing to the consumer because it gets twisted around the Fannie or Freddie conforming and conforming high balance loan limits, which are between $453,100 and $679,650 respectively in Napa County.

Unfortunately, this leads to confusion about interest rates and challenging credit rules to navigate around too.

But more intriguing is the wide range of product offerings available for those who experienced a major derogatory credit event, like a foreclosure, short sale or bankruptcy, which ultimately allow these impacted consumers to quickly borrow jumbo sized loans again.

If the intent is to facilitate the easy return of the jumbo loan borrower to the housing market soon after one of these events, then why do these same jumbo investors make it difficult for them to transition out of these specialty loans and over to fair market-valued products?

Perhaps one of the reasons is the desirable financial profile of a jumbo sized loan borrower. They usually are higher wage earners with strong employment histories and increasing reserves.

Yet because of their previously damaged credit profile, they are unable to make a timely transition out of their newly acquired loan and into something that costs less per month.

That would be a win-win-win for the borrower, the lender and the local economy respectively as it would presumably free up more cash flow to encourage spending on other goods and services.

Since there are jumbo sized loan products available that only require you to be one day out of foreclosure, short sale or bankruptcy or products available with credit scores down to 500, you’ll end up staying in your newly acquired loan for a longer period of time while you make a full credit recovery.

Depending on the jumbo investor and the health of your credit profile, your timeline for re-entry into the “better rate than you have now” category might be two years, four years or up to seven years.

This means you better not have any missed payments, collections, charge-offs, etc. during this time, otherwise you’re sort of stuck until you can re-establish your credit accordingly.

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Chris Salese can be reached at chris@delsurmortgage.com or 707-363-4439. He is a licensed California mortgage lender (LO NMLS #254469 — State License #CA-DBO 254469 — Corp License #4170013 Corp NMLS #3113) and equal housing lender.

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