Deep-pocketed homebuyers are paying lower average rates on jumbo mortgages and lenders are requiring smaller down payments and waiving mortgage insurance to make the loans even easier for the wealthy to get.
According to a report on CNN Wire, jumbo mortgage lenders are charging lower interest rates to qualified buyers than average borrowers pay.
The Mortgage Bankers Association confirmed on September 21, 2014, that the average rate on jumbo loans was 4.24% the previous week, compared with 4.36% for conventional 30-year, fixed-rate mortgages.
"Jumbo" mortgages are above the conforming loan limits of $417,000, which makes them eligible for purchase by Fannie Mae or Freddie Mac. For high-cost areas such as California coastal cities, jumbo loans can go as high as $625,500 or more and still conform to secondary market standards.
The reason this is important is that it gives a means to lenders to sell their loans so they can profit on fees and replenish their coffers to make more loans.
By making jumbo loans and keeping them on their books, lenders can stay in front of wealthy borrowers to pitch services such as brokerage services or retirement planning.
Jumbo mortgage borrowers are getting other perks, too. CNN reports that some lenders are requiring as little as 10 percent down from wealthy clients and in some cases are waiving private mortgage insurance.
They are also lowering credit score requirements from 700 to 650 to qualify more jumbo loan borrowers. With home prices continuing to rise, the risk of default is lower, allowing banks to take advantage of robust markets such as Los Angeles, San Francisco, New York City and Washington D.C.
Dan Green, blogger and mortgage market expert, says that prime mortgage borrowers are also having an easier time obtaining mortgages because lenders are reducing or eliminating investor overlays.
One example of an investor overlay is requiring a 620 FICO score for applicants to secure an FHA-guaranteed loan when FHA requires a credit score of only 580.
"Investor overlays," explains Green, "are mortgage approval standards which are enforced by a bank, but not required by the government.
In Q2 2014, 23.9 percent of banks reported easing loan standards -- twice the number in Q1. Mortgage software firm Ellie Mae reported that 60 percent of all loans closed, compared to only 54 percent in all of 2013.
If you've been turned down for a mortgage within the last two years, says Green, it may be worthwhile to re-apply today.