“Lenders have raised their minimum credit scores and lowered their loan-to-value or leverage amounts,” Ohlbaum says.
The definition of excellent credit may vary by lender, as does the required down payment amount. But generally, a FICO score of 800 or above is considered excellent. And you’ll typically need a down payment of at least 20% to qualify.
“The folks getting these loans are those who weren’t impacted, or as impacted, by the pandemic in the sense of getting furloughed or laid off,” Kan says. “These are people who are more likely to be able to work remotely and still make the same amount of money they’ve always made. It’s a different segment of the market.”
Jumbo loan rates
Along with rates on conforming mortgages, rates on jumbos have been steadily declining. The average rate on a 30-year, fixed-rate jumbo mortgage was 3.81% last week, according to Bankrate’s weekly national survey of mortgage rates.
Notably, you’ll pay more right now for a jumbo mortgage (if you can get one) than you will for a conforming loan. But that hasn’t been the case for several years. Since mid-2013 up until early this year, jumbo loan rates remained lower than conforming rates, according to the MBA. Now that’s flipped.
This reverse further points to market tightening and the overall availability of cash to lend on the part of the banks, Kan says.
With the lower rate for conventional loans, it might make sense for people with the financial means to make a down payment on their home that’s large enough to bring the loan into conforming territory. This would also ease the burden of meeting the more-stringent credit and debt ratios that many jumbo lenders are requiring.