Yesterday was a rather drab day in mortgage circles — not much happened and mortgage rates idled. The bigger story was how liquidity appears to be slowly returning to some areas of the beaten-down mortgage market.
Specifically, liquidity is returning to prime, fixed-rate, full documentation jumbo loans and pricing appears to be improving (slightly).
The “prime” designation loosely correlates to a salaried employee with a credit score of at least 720. This class of borrower is a much lower risk than a sub-prime borrower who is generally categorized as having a credit score below 620.
The higher a homeowner’s credit score, the more likely he is to make on-time mortgage payments.
Jumbo loans differ from Fannie Mae/Freddie Mac conforming loans based on the amount borrowed. Jumbo loans meet the following loan size criteria:
- Home, condo or townhome: Over $417,000
- 2-unit: Over $533,850
- 3-unit: Over $645,300
- 4-unit: Over $801,950
As more investors express a willingness to buy jumbo mortgage bonds, we can expect jumbo mortgage interest rates to improve, and we’ll maybe even see that improvement spill-over into other product types — including sub-prime loans.