House prices may be beginning to cool, but that doesn’t mean the climb is over. CNBC notes that prices have risen 6% on the previous year, and for many areas of the country, the median house price continues to stay high. This is bad news for buyers looking to get their foot in the door. On the plus side, regulators and lenders have come together to try and find a way out of this malaise – and ensure that the future doesn’t create such a restrictive environment when people have worked hard to put themselves in the homebuying position.
The jumbo loan
One option for homeowners is the jumbo loan. Defined as a loan that exceeds the conforming loan rate set by Fannie Mae and Freddie Mac, jumbo loans are a way for homeowners with the high credit and capital to get their hands on larger properties. With the way that house prices have risen, the problem is that a jumbo loan doesn’t necessarily cover an over-the-top home anymore; in many cities, it’s an average purchase. 2021 conforming loan limits change this landscape – set at $548,250 for 2021, a jumbo loan will by definition exceed this. However, some analysts believe that this figure is simply set too low.
State limits
Differences can be found in county-to-county limits. Time magazine highlights New Jersey’s Monmouth/Mercy County border, where the conforming loan rises almost $300k just over the course of a single road. While disheartening, this can also provide some guidance to buyers. It will show exactly where value in the market can be found, and where it is lacking, and guidance can be drawn along those lines. These rules can be confusing, and in a market that needs to benefit buyers after a concerned year of growth for sellers, something has to give. In the self-employed homebuyer’s sector, that change may be on the way.
The non-qualifying comeback?
Self-employed people have the greatest difficulty with mortgages. Without complete records and a number of other well-planned-out items, it’s difficult to obtain mortgages with the same ease that salaried employees can. With liberalization over lending, non-QM loans are spreading more rapidly and becoming more commonplace in terms of being granted. While these aren’t secured by Fannie Mae or Freddie Mac, they aren’t toxic in the way that the 2008 crisis revealed – they’re simply on a different level of assurance. The Washington Post has noted a huge rise in the number of non-QM loans that are being issued, and this is good news for the wider industry. Salaried employees may have a better time in those marginal deals than they had before, and self-employed people have new hope.
This nods to an upwards turn for the buyers in the current red hot housing market. Financing is shifting to favor those looking to invest in the real estate market, and that’s only going to be good news for the continued health of American property.