ONE MORE REASON JUMBO RATES ARE LOWER THAN CONFORMING
After reading this recent blog, a friend of mine who owns a mortgage bank reminded me of one more reason why jumbo rates are lower than conforming rates.
Big banks will sometimes buy loans at a loss because they expect to make money by “cross-selling” other products (HELOCs, Financial Planning, Premium Accounts, etc.) to well-qualified borrowers.
SELLER RENT-BACKS FOR 60 DAYS
Sellers can rent back a property they just sold (and remain in the home) for up to 60 days after close of escrow.
We often tell Realtors and buyers, however, to limit the rent-backs to 59 days to ensure that the new buyers are able to move into the property by day 60.
We request the 59-day-limit to avoid a potential breach of the owner-occupancy rules and/or a delay in closing – just in case a persnickety underwriter decides 60 days is too close for comfort.
As a reminder, every owner-occupied buyer has to sign a document that states she promises to occupy the property within 60 days of close.
In any case, rent-backs are sometimes a nice additional enticement to get sellers to accept a particular offer.
I might add that if rent-backs go beyond 60 days (which they sometimes do), it is very important to make sure your lender does not know about it if the financing is “owner-occupied.” 😊
ARMs ARE BACK!
An ARM of course is an Adjustable Rate Mortgage, and they are back with a vengeance!
They are a great option for borrowers with a shorter time-horizon or for borrowers who are feeling too much pain for missing out on 2020’s record low rates.
Our conforming 5 Year ARM (fixed for 5 years) is now about 7/8% lower than our 30-year fixed options.
And our conforming 7 Year ARM is now about 3/4% lower!
Please note too that the world does not come to an end when an ARM adjusts after the 5 or 7 year “fixed period.”
All ARMS have rate-adjustment and lifetime “caps.”
Our 5 Year Conforming ARM, for example, has a 2% cap on the first adjustment; a 1% adjustment cap for all others; and a lifetime cap of 5%.
So, if a 5 Year ARM starts out at 2.5% for five years, it can only adjust to 4.5% with the first adjustment, and it can never go higher than 7.5%.
In an inflationary environment, like most every market watcher expects in a few years, 7.5% is a very low rate.
Jay Voorhees
Founder/Broker | JVM Lending
(855) 855-4491 | DRE# 1197176, NMLS# 310167
