The continued improvement in the Chicago real estate market has also improved buyers’ ability to purchase a luxury home, thanks to loosened lending standards among jumbo mortgages.
But that could soon change. The standards for a jumbo loan are set to tighten in January 2014, and it’s important that my clients and prospective clients and buyers know what’s in store for their ability to purchase a Chicago luxury home.
The Low-Down on Jumbo Loans
Jumbo mortgages are those starting at $417,000 for a Chicago property. They’ve recently worked their way back into the mix among luxury buyers, thanks to banks that are once again willing to invest in these types of loans and interest rates that have dropped lower than those of conforming loans.
However, new rules that begin in January will require more from borrowers in order to qualify for a jumbo loan. Buyers will be required to pony up ample documentation for tax returns, assets and earnings, with no leniency for those who aren’t able to do so. Even high-net worth borrowers or those who have long-standing histories with their banks (two groups that have had much better luck getting jumbo loans in recent years) will fall under the new regulations.
While the new standards don’t itemize exactly what will be required from borrowers, one of the key things to note is the debt-to-income ratio, which will be capped at 43% in order to qualify for a jumbo loan. This could pose an issue for folks who are self-employeed and show fluctuations in their tax returns.
These are standards on top of the already-tighter regulations among high-end borrowers, who typically have to put down a larger down payment (a minimum of 20%) and show a squeaky-clean credit history.
I invite any would-be buyers to contact me to learn more about the definitive details of these new lending rules for 2014. I can provide answers to your questions or steer you in the right direction so you know what paperwork you should have put together in order to purchase property after the new year.
If you’re thinking of purchasing Chicago real estate with a jumbo loan in 2014, here are a few things to consider:
Check out the features of a loan: Buyers are often pre-occupied with the number in front of the percentage sign when it comes to shopping for a mortgage loan. But the bullet points of what a loan actually offers are equally important to ensure it’s in line with what the buyer wants and expects out of a mortgage.
Be upfront: Inflating your income or other less-than-honest moves during the mortgage process means both the borrower and lender lose out in the end, and doing so could be considered mortgage fraud.
More changes are on the way: Additional regulations set for next year to make the lending process more consumer-friendly could mean more changes for buyers and banks alike.
If you have Chicago real estate purchase on the horizon, I’d encourage you to start looking now to see if you’re able to get a deal sealed by the end of the year and avoid the potential headache these new rules could bring. If you’d like to see what’s on the market, or discuss these lending changes in more detail, contact me at (312) 498-5080 or email me at [email protected]