A hike in the threshold for jumbo loans could benefit originators because clients are more comfortable with conforming loans than jumbo loans, according to one professional.
“For some it’s a psychological hurdle to get over—just the word ‘jumbo’—so [raising the limit] helps,” Allen Decuyper, an agent with Nashville-based Neal Clayton Realtors told the Wall Street Journal.
Currently, the threshold for jumbo loans in most states is $417,000 and $625,500 in higher-priced markets.
If the FHFA does decide to raise the baseline for jumbo loans, the new rule will go into effect on January 1, 2016.
And if the limit were to be increased, clients would more easily qualify for pricier homes – meaning a larger potential pool of business for brokers -- since more loans will be considered conforming.
Clients typically have to put less money down and aren’t required to have as high a FICO score for conforming loans than they do for jumbo loans.
But regardless of the outcome, originators should be just fine, according to one player.
“Right now I can price a jumbo loan better than a conforming loan by about half percent,” Elliott Pratt of Mortgage Network told Mortgage Professional America. “A jumbo borrower typically makes more money and has better credit and I’m encouraged by the jumbo market these days.”
The Federal Housing Finance Agency (FHFA), which sets jumbo loan limits, began collecting public opinion about a proposed increase in the jumbo loan threshold and the deadline to submit input is July 27.