In the go-go years, around 2003 to the middle of 2007, lenders steadily relaxed their standards on jumbo loans to compete for customers. Borrowers easily got jumbo mortgages without having to verify the income stated on their loan applications. Many lenders gave jumbo loans to homebuyers putting just 5 percent down -- for example, buying a half-million-dollar house with $25,000 down, and borrowing the remaining $475,000.
Beginning in August 2007, a credit squeeze scared lenders away from the jumbo market. Jumbos gradually returned, but with tougher requirements.
To qualify for a jumbo mortgage today, you should expect:
- To make a down payment of at least 20 percent for a purchase (or have at least 20 percent equity in a refinance).
- To document your income.
- To get an adjustable-rate loan, because fixed-rate jumbos are relatively rare.
- For your monthly mortgage payment to be no more than 38 percent of your income before taxes.
Borrowers who meet those qualifications find that today's rates are attractive. "Yesterday I quoted a $900,000, five-year ARM at 4.25 percent," says Dan Green, loan officer for Waterstone Mortgage in Cincinnati. That loan quote was for a condominium with a down payment of 25 percent.
