Is it harder to get a jumbo loan in NYC because of coronavirus?
Jumbo lenders have become more conservative in the face of wide job losses due to the coronavirus pandemic.
I've heard that some lenders are suspending jumbo loans because they're having trouble reselling the loans they make, and don’t want to get stuck with them. Is it still possible to get a jumbo loan in New York City? How do I go about it?
Lenders are exercising more caution these days due to economic uncertainty, so you may need to widen your search for a mortgage, our experts say.
Cash offers are king these days, with many mortgage banks putting loans on pause out of concern of being unable to resell them. Jumbo loans—which in NYC are loans above $765,600—may be especially hard to come by. Wells Fargo, for instance, tightened restrictions on its jumbo loans.
"Mortgage lenders for jumbo loans don’t have a lot of options to sell to the secondary market that conforming loans do. The private market is much smaller, and many jumbo loans are held in the bank’s portfolio. As a result, jumbo loan requirements are more stringent," says Jonathan Miller, president and CEO of appraisal firm Miller Samuel.
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Throughout the coronavirus crisis, he adds, banks have been lending more stringently and taking risk mitigation seriously. While this may be frustrating to buyers, it's actually good news—a lack of this kind of caution was a major factor behind the 2008 financial crisis.
"Jumbo lenders are more conservative due to the liquidity threat—that is, borrowers suddenly losing their jobs," Miller says. "Therefore, they are offering a more conservative loan-to-value ratio, requiring higher credit scores, and not dropping mortgage rates anywhere near as much as the Federal Reserve hoped."
The criteria for larger loans is stricter now, making it more important than ever to prep your finances before you buy. But it's not impossible to get a jumbo loan—you'll just need to cast a wider net.
"Jumbo financing is still available. However, you may also be required to put a larger down payment than what you were potentially initially looking for," says Brittney Baldwin, vice president of National Cooperative Bank (a Brick sponsor). "It is a good idea to contact a few lenders to see what their criteria might be and look to get pre-qualified before you look to make an offer."
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