HELOCs Fading; Jumbo Rates Way Higher; FAQs

Orange town home with blue shutters purchased using a Jumbo loan. Jumbo rates are currently up due to the COVID-19 crisis

Two of the nation’s largest banks announced that they will no longer originate new Home Equity Lines of Credit (HELOCs).

This is of course in response to the COVID-19 crisis.

We still offer HELOCs but only to 90% Combined Loan to Value (95% CLTV no longer exists) and only for purchase money financing.

In Texas, HELOC options have always been limited but we still have 2nd mortgage/lien options up to 95% (for small loan amounts).

Note that 2nd mortgages differ from HELOCs in that they are issued in lump sums at close; borrowers cannot redraw against them after they pay them down; and the rates are usually fixed (while HELOCs are variable, tied to Prime Rate).

JUMBO RATES SHOOT UP

The interest rates associated with jumbo loans shot way up today.

This is b/c the biggest player in the jumbo market right now (Chase) significantly increased its rates.

Jumbo rates are well over 1% higher today than where they were yesterday.

RECENT FAQS

Below are some answers to questions we’ve been receiving from agents lately:

What Documents Do WE Need to Pre-Approve a Buyer?
- Completed loan application and auth to run credit
- Most recent month of paystubs
- Most recent two years of Taxes (only if Jumbo, self-employed or using rental income)
- Most recent two months of bank statements
- Property docs for any homes owned (Mortgage, insurance, HOA)
- Will not hold up a pre-approval for these items, but we also ask for:
  - W2s
  - Driver’s License
What is the lowest credit score for A-paper?
- Fannie/Freddie – 620
- FHA – 640 with strict overlays
How much do credit scores affect a borrower’s interest rate?
- For conforming loans, every 20 points reduction in a credit score pushes up the rate by about 1/8% in most cases.
What is the max for income to debt ratio?
- Fannie- 49/49% (with lower down payment and weaker credit – closer to 45%)
- Freddie – 45% in most cases, with some exceptions up to 49%
- FHA – 45/55%
- VA – 55% ish – technically no DTI cap as long as they satisfy residual income guides (we had a recent approval with ratios in the mid 60’s)
- Jumbo – Mainly 43% but limitations abound
What are our current closing periods (time from contract to close)?
- We still need 30 days for every type of loan b/c of the COVID-19 crisis