10 ms·

How Home Loans Have Changed since 2000

97 points by bradleybuda 10y ago

techsupporter 10y ago
I found this interesting, especially the bit about the condos since I am part of that trend (selling a SFH and moving to a condo unit). The graphs of percentage-down payments looks exactly backwards from what I might have guessed had someone asked me just prior to reading this. In the run-up to the meltdown, most borrowers were still putting between 5 and 20 percent down. (I think that blue line to the left of the 5 value is "3.5%," or the standard FHA down payment.) My guess would have been that the far left of that graph would grow higher as 2008 approaches and then drop after. It doesn't; the 20% line stays as the overall winner, even though 5 and 10 percent down still collectively beat it. I see that the post frames it as "so many low-down mortgages" but I look at it as "a whole lot of people were still putting 20% down." I wonder if some of this had to do with the appraised value...the value was seen as "high enough" so a higher initial LTV was acceptable because 5% was still sufficient skin in the game. (Oh, who am I kidding? Many loans made in the years prior to 2008 had only superficial relationships with reality.)
- hueving 10y ago
  It's interesting how perspectives change. If you talk to older folks they will point out that even 20% down was 'low'. I think my father had to have something like half to get a mortgage (late 1960s). I can't help but wonder if we would have much more affordable housing if it wasn't so easy to get such massive loans relative to their down-payments.
  - verelo 10y ago
    I don't think that's in question; The simple fact is money for housing is cheap right now, which means it requires more of it to convince owners to part with their assets as most of them still need to buy elsewhere after they sell a house. If money was hard to come by, houses would be cheaper, but then you would also have more difficulty getting that money to start with. I'm not sure the affordability would improve, it's hard to say what other impacts a higher interest rate (or even more so, a higher % down requirement) market would create. The only exception to all this are new houses and condo builds, but in those markets the reason they're more affordable comes down to a combination of location and risk, risk that the property may not actually be worth its selling price, so you get it at a 'discount' to the market if it were in a more established area.
    - jdmichal 10y ago
      > ... most of them still need to buy elsewhere after they sell a house. This is one reason that I never understood people treating their first house as an investment. Yay, it went up 50%... And so did the house you'll buy after you sell it. You need to live somewhere. Your first house is covering a short position, not an investment.
      - grellas 10y ago
        It is a mistake to treat housing as an investment but that doesn't mean it can't be for the right circumstances, e.g., many who bought homes in Silicon Valley 20+ years ago have seen their home prices double or triple and they can easily go to other parts of the country where they can buy a replacement home of comparable quality for less than half the sales proceeds of their current home, pocketing the difference. This is most certainly an anomaly in the context of the broader housing market. But it is a huge benefit for those who do happen to benefit in this way.
        rconti 10y ago
        20+ years ago? Probably more like 10x. edit: in nominal terms.
      - mkaziz 10y ago
        Couldn't you apply that for anywhere in the market? Eg. my money is in index funds, but if the market collapses, the value of my index funds gets wiped out and I can't exactly buy a house on the cheap ...
        hx87 10y ago
        If the market collapses, you're screwed anyway, but at least your index fund is diversified (I hope) and liquid, whereas your house is the most undiverse and illiquid asset you can buy.
        jdmichal 10y ago
        I'm not quite sure what you mean. My point is that you need somewhere to live. It's like being short a stock and you need to cover. Covering a short is closing an investment position, not opening one. If you sell the house, now you're short again and need to cover. Once you buy your second property you are actually investing.
- pasbesoin 10y ago
  Didn't read the article, but 20% is the magic amount where one of the insurance payments (essentially, insurance you take out against the risk of your defaulting) goes away. The advice used to be, if you can do 20%, do so, to save yourself that insurance expense (in the "used to be" markets, at least, where you ended up ahead, financially, by doing so). P.S. Rereading my last sentence -- or, "sentence" -- I see that I definitely need one, or several, more cups of coffee.
  - danvasquez29 10y ago
    I believe it's 'PMI' your referring to. You don't need 20% to avoid that anymore with a lot of programs, it's down to 5% or even 3.5% if your credit is high enough. 720 is the sweet spot right now where you should pretty much never have PMI. There's also some incentives out there right now where the lender pays the PMI for you.
    - breischl 10y ago
      In addition, PMI was not originally tax deductible. They made it tax as one of those stimulus measures, I think around 2008 or 2009 (about 1 month after I paid mine off... not that I'm bitter or anything). Since PMI is tax deductible now that makes it effectively less expensive, and avoiding it less advantageous/important.
    - massysett 10y ago
      You don't get something for nothing here. The low down payment loans that lack PMI generally have higher rates. Lender-paid PMI always comes with a higher rate. Even if your credit is well above 720 it can still be better to pay PMI than to have a higher-rate loan. The PMI eventually goes away; to get rid of a higher rate, you have to refinance. The best choice depends on factors such as how long you will keep the home, but if you're putting less than 20 percent down, avoiding PMI is not a worthwhile objective. PMI might actually be the best deal.
    - pasbesoin 10y ago
      Yes, "PMI". I think I have to agree with my child co-commenters, that if they're waiving PMI in one sense, you're paying for it in another. You always have to add up all the pieces -- over their respective lifespans -- and see where your total costs come out. As well, whether retaining more money up front and pumped into your own investments is going to outperform any additional eventual expense, allowing you net (and also considering taxes) to come out ahead. Past a certain point, I'd say, make sure you're doing pretty well, financially, even if you end up leaving a couple of hundred or even a thousand on the table over the lifespan of the load. Instead, focus your remaining time and energy on having a good life. Worth far more than worrying about the last dollar.
- liveoneggs 10y ago
  an 80/20 still puts down 20%, just in a different way. No sure if the graph is accounting for that.
Shivetya 10y ago
Well I have two effects on their story first hand. The multiple loans to buy a home or such was what the buyer of my previous home did to get in the door. 80/10/10 however it was not because the values exceeded maximum loan values but they could not make the down payment but wanted in the area. The second is the combining of credit scores for couples, good friends are currently renting as his wife's score is the pits. This is even after spending two years so far paying down here debts which were not education related. On his own he can land any house they want, together they have to accept loan rates that make it not worth the costs. I figure the twenty percent rule saw a resurgence because that number was so ingrained into the minds of buyers and sellers.
- jdmichal 10y ago
  I got a mortgage with just myself as the signer. And this was with a major bank; nothing shady or weird. Since my wife is on the title, all she had to sign was a single page indicating that she was allowing her half of the property interest into the mortgage. But my income and credit were enough to completely support the mortgage we got, so that's what we went with.
  - cmdrfred 10y ago
    My fiance got our house for us. It's in her name until we refinance in a few years and my credit is better.
    - deleted 10y ago
      [deleted]
  - avasylev 10y ago
    I did the same, with me as only applicant, mostly because it was slightly less paperwork. One possible drawback is that you can't count two incomes, just the applicant income. Though "affordability limit" that bank calculates (at least in my experience) is very stretched, I wouldn't be able to pay the max bank was ready to loan.
muninn_ 10y ago
It depends on the circumstances. I have a great paying job and good job security and just bought a condo. Had I waited to have 20% down, I would have had to wait at least 10 years, and in the meantime still pay rent somewhere. So I can either go in with very little down (in my case I actually walked out with a check) so that I can pay extra each month toward the principle, or I can save that down payment and essentially pay for somebody else's property. Many of my friends simply can't afford to save for a house because rent is so high that they just don't have savings. You can argue that they should move to cheaper housing (and they did) but at some point the balance between cheap and safe will tip away from safety.
- gfo 10y ago
  I'm in the same boat right now - I'm paying >$2k/mo in rent. I could certainly wait to get the full 20% down payment, but it makes more sense to me if I buy a condo now, build the equity, and down the road I can keep saving for a nicer place once I outgrow the condo. Sure I'll be mostly paying interest to start, but this way I'm at least seeing some sort of investment if I have to spend that much per month on living. I could certainly have found a roommate or a cheaper place but frankly, I've gotten used to what I'm paying now and I still have plenty leftover to contribute to a 401k, savings, and enjoy myself.
- AWildDHHAppears 10y ago
  If everyone had to pay 20% down, house prices would be lower.
  - vibrio 10y ago
    Probably, but from an economics perspective, i'm not sure who will push that position. There seems to be plenty of Lenders willing to take a chance with someone offering a lower down payments and in turn charge them a higher rate.
    - toomuchtodo 10y ago
      Because the mortgages are backed by the US government.
douche 10y ago
With the state of rental rates at the moment, if you can scrape any kind of down payment together, it's worthwhile to buy rather than rent. Even if you are on a 3.5% down FHA loan, the mortgage + taxes + PMI is considerably less than renting the equivalent property. If you're smart, buy a duplex, and basically get your tenant to pay the mortgage for the whole building.
- throwthisawayt 10y ago
  Unfortunately the economics don't really work out for those in the Bay Area.
- maxxxxx 10y ago
  Depends on where you are though.
- jandrewrogers 10y ago
  That very much depends on where you live. I have a pretty thorough spreadsheet for modeling this kind of thing. Even if I had a 20% down payment, fully accounted for tax deductions, payment against principal, etc, and ignoring costs like maintenance, my lease in Seattle is significantly less than the monthly cost of a mortgage for the same place. This is true more often than people expect. Many landlords are not covering a mortgage payment as large as yours would be, or any mortgage at all, with your rent check. Their cost basis is not your cost basis so it is not unexpected that the market clearing price for rent is below the monthly cost for many people to buy the same property.
  - derefr 10y ago
    > Many landlords are not covering a mortgage payment as large as yours would be Why not? I can understand already owning the property, but do property-management companies just get better mortgage rates or something? Does that mean I could theoretically save money by buying a house as a company and then renting that house to myself as an individual?
    - tinylittlefish 10y ago
loeg 10y ago
Figure 4 and 5 have the same credit groups, but opposite colors. That seems unnecessarily confusing.
millstone 10y ago
How has the ARM vs fixed mix changed? We started with a 30 year fixed, but refi'd to an ARM after we got over the conventional wisdom and noticed how much lower the rates were. We paid it off before the rate reset and ended up saving thousands.
- dpark 10y ago
  It really depends on your financial situation. If you've got the resources to pay off an ARM before the reset, then absolutely you should do that. Why not? If you can make the payments on the 30 year easily, then an ARM could be a good bet to save some money, but there's some moderate risk. If you're a bit stretched making a 30 year, then an ARM is probably too risky because a rate increase could push you into default. If you are able to make the payments on the ARM but not the 30 year fixed, then you probably shouldn't buy at all (at least not that property).
post_break 10y ago
Watching the loan value increase makes me realize I won't be able to afford even a dumpster with shutters. I hear about all these people buying houses without much down payment and it makes me feel uneasy.
- rconti 10y ago
  I felt that way in 2006. "I'll never be able to save up a down payment because the estimated down payment is going up faster than my ability to save!" In retrospect, that was a sign. (of course, I didn't learn my lesson, and bought a house in the Valley 2 years ago)
adamwi 10y ago
I find figure 7 very interesting, "Share of newly mortgaged homes by property type". I seems like a very large shift in what types of homes that are mortgaged (e.g. condos going from ~19% to ~43%). Anyone with deeper insight in this trend? As an outsider European I was not aware of such a strong urbanization trend in the US, or are there other mechanisms in play as well?
- r00fus 10y ago
  Could be affordability, as single-family homes become unaffordable in many markets.
- throwawaylalala 10y ago
  Im curious if it's because of who builds these condos and perhaps theres a management revenue fee to collect as well....
- jghn 10y ago
  One thought is that there's been a recent trend for folks moving back into urban areas.
rconti 10y ago
One thing they didn't mention is that jumbo loan rates have tumbled, and are, in some cases, cheaper than conforming loans. I don't know how or why that is, but it sure makes paying PMI less attractive!
- desdiv 10y ago
  >jumbo loan rates have tumbled, and are, in some cases, cheaper than conforming loans Here's a WSJ article¹ explaining the reason behind this weird inversion, for anyone like me who was wondering: "how is that economically possible?" ¹ http://www.wsj.com/articles/SB10001424127887323893004579055283906962194 http://www.wsj.com/articles/SB100014241278873238930045790552... Here's the pertinent section in case anyone is hit with the paywall: Conforming loans have become more expensive because federal officials, in a bid to reduce the outsize footprint of Fannie and Freddie, have raised the fees those companies charge to lenders, which translates into higher mortgage rates. Meanwhile, interest-rate volatility has driven up yields on mortgage bonds issued by Fannie and Freddie as investors brace for a slowdown in the Federal Reserve's bond-buying program, which has included those mortgage bonds. That has boosted rates on conforming loans. Jumbo mortgages, meanwhile, are increasingly kept on banks' balance sheets, which means prices aren't usually set by bond markets. "Banks have more deposits than loans today, so the desire to put that money to work, as well as the fact that it's at a very low cost, allows us to make [jumbo] loans at a very good interest rate," said Mr. Blackwell.
cloudjacker 10y ago
So many good nuggets in this analysis! "If two people wanted to buy a home together, only the lower of their two credit scores would be factored into important calculations like the mortgage’s interest rate." "Mean down payment on new mortgages by credit score tier"

97 points by bradleybuda 10y ago

I found this interesting, especially the bit about the condos since I am part of that trend (selling a SFH and moving to a condo unit). The graphs of percentage-down payments looks exactly backwards from what I might have guessed had someone asked me just prior to reading this. In the run-up to the meltdown, most borrowers were still putting between 5 and 20 percent down. (I think that blue line to the left of the 5 value is "3.5%," or the standard FHA down payment.) My guess would have been that the far left of that graph would grow higher as 2008 approaches and then drop after. It doesn't; the 20% line stays as the overall winner, even though 5 and 10 percent down still collectively beat it. I see that the post frames it as "so many low-down mortgages" but I look at it as "a whole lot of people were still putting 20% down." I wonder if some of this had to do with the appraised value...the value was seen as "high enough" so a higher initial LTV was acceptable because 5% was still sufficient skin in the game. (Oh, who am I kidding? Many loans made in the years prior to 2008 had only superficial relationships with reality.)

hueving 10y ago
It's interesting how perspectives change. If you talk to older folks they will point out that even 20% down was 'low'. I think my father had to have something like half to get a mortgage (late 1960s). I can't help but wonder if we would have much more affordable housing if it wasn't so easy to get such massive loans relative to their down-payments.
- verelo 10y ago
  I don't think that's in question; The simple fact is money for housing is cheap right now, which means it requires more of it to convince owners to part with their assets as most of them still need to buy elsewhere after they sell a house. If money was hard to come by, houses would be cheaper, but then you would also have more difficulty getting that money to start with. I'm not sure the affordability would improve, it's hard to say what other impacts a higher interest rate (or even more so, a higher % down requirement) market would create. The only exception to all this are new houses and condo builds, but in those markets the reason they're more affordable comes down to a combination of location and risk, risk that the property may not actually be worth its selling price, so you get it at a 'discount' to the market if it were in a more established area.
  - jdmichal 10y ago
    > ... most of them still need to buy elsewhere after they sell a house. This is one reason that I never understood people treating their first house as an investment. Yay, it went up 50%... And so did the house you'll buy after you sell it. You need to live somewhere. Your first house is covering a short position, not an investment.
    - grellas 10y ago
      It is a mistake to treat housing as an investment but that doesn't mean it can't be for the right circumstances, e.g., many who bought homes in Silicon Valley 20+ years ago have seen their home prices double or triple and they can easily go to other parts of the country where they can buy a replacement home of comparable quality for less than half the sales proceeds of their current home, pocketing the difference. This is most certainly an anomaly in the context of the broader housing market. But it is a huge benefit for those who do happen to benefit in this way.
      - rconti 10y ago
        20+ years ago? Probably more like 10x. edit: in nominal terms.
    - mkaziz 10y ago
      Couldn't you apply that for anywhere in the market? Eg. my money is in index funds, but if the market collapses, the value of my index funds gets wiped out and I can't exactly buy a house on the cheap ...
      - hx87 10y ago
        If the market collapses, you're screwed anyway, but at least your index fund is diversified (I hope) and liquid, whereas your house is the most undiverse and illiquid asset you can buy.
      - jdmichal 10y ago
        I'm not quite sure what you mean. My point is that you need somewhere to live. It's like being short a stock and you need to cover. Covering a short is closing an investment position, not opening one. If you sell the house, now you're short again and need to cover. Once you buy your second property you are actually investing.
pasbesoin 10y ago
Didn't read the article, but 20% is the magic amount where one of the insurance payments (essentially, insurance you take out against the risk of your defaulting) goes away. The advice used to be, if you can do 20%, do so, to save yourself that insurance expense (in the "used to be" markets, at least, where you ended up ahead, financially, by doing so). P.S. Rereading my last sentence -- or, "sentence" -- I see that I definitely need one, or several, more cups of coffee.
- danvasquez29 10y ago
  I believe it's 'PMI' your referring to. You don't need 20% to avoid that anymore with a lot of programs, it's down to 5% or even 3.5% if your credit is high enough. 720 is the sweet spot right now where you should pretty much never have PMI. There's also some incentives out there right now where the lender pays the PMI for you.
  - breischl 10y ago
    In addition, PMI was not originally tax deductible. They made it tax as one of those stimulus measures, I think around 2008 or 2009 (about 1 month after I paid mine off... not that I'm bitter or anything). Since PMI is tax deductible now that makes it effectively less expensive, and avoiding it less advantageous/important.
  - massysett 10y ago
    You don't get something for nothing here. The low down payment loans that lack PMI generally have higher rates. Lender-paid PMI always comes with a higher rate. Even if your credit is well above 720 it can still be better to pay PMI than to have a higher-rate loan. The PMI eventually goes away; to get rid of a higher rate, you have to refinance. The best choice depends on factors such as how long you will keep the home, but if you're putting less than 20 percent down, avoiding PMI is not a worthwhile objective. PMI might actually be the best deal.
  - pasbesoin 10y ago
    Yes, "PMI". I think I have to agree with my child co-commenters, that if they're waiving PMI in one sense, you're paying for it in another. You always have to add up all the pieces -- over their respective lifespans -- and see where your total costs come out. As well, whether retaining more money up front and pumped into your own investments is going to outperform any additional eventual expense, allowing you net (and also considering taxes) to come out ahead. Past a certain point, I'd say, make sure you're doing pretty well, financially, even if you end up leaving a couple of hundred or even a thousand on the table over the lifespan of the load. Instead, focus your remaining time and energy on having a good life. Worth far more than worrying about the last dollar.
liveoneggs 10y ago
an 80/20 still puts down 20%, just in a different way. No sure if the graph is accounting for that.

Shivetya 10y ago

Well I have two effects on their story first hand. The multiple loans to buy a home or such was what the buyer of my previous home did to get in the door. 80/10/10 however it was not because the values exceeded maximum loan values but they could not make the down payment but wanted in the area. The second is the combining of credit scores for couples, good friends are currently renting as his wife's score is the pits. This is even after spending two years so far paying down here debts which were not education related. On his own he can land any house they want, together they have to accept loan rates that make it not worth the costs. I figure the twenty percent rule saw a resurgence because that number was so ingrained into the minds of buyers and sellers.

jdmichal 10y ago
I got a mortgage with just myself as the signer. And this was with a major bank; nothing shady or weird. Since my wife is on the title, all she had to sign was a single page indicating that she was allowing her half of the property interest into the mortgage. But my income and credit were enough to completely support the mortgage we got, so that's what we went with.
- cmdrfred 10y ago
  My fiance got our house for us. It's in her name until we refinance in a few years and my credit is better.
  - deleted 10y ago
    [deleted]
- avasylev 10y ago
  I did the same, with me as only applicant, mostly because it was slightly less paperwork. One possible drawback is that you can't count two incomes, just the applicant income. Though "affordability limit" that bank calculates (at least in my experience) is very stretched, I wouldn't be able to pay the max bank was ready to loan.

muninn_ 10y ago

It depends on the circumstances. I have a great paying job and good job security and just bought a condo. Had I waited to have 20% down, I would have had to wait at least 10 years, and in the meantime still pay rent somewhere. So I can either go in with very little down (in my case I actually walked out with a check) so that I can pay extra each month toward the principle, or I can save that down payment and essentially pay for somebody else's property. Many of my friends simply can't afford to save for a house because rent is so high that they just don't have savings. You can argue that they should move to cheaper housing (and they did) but at some point the balance between cheap and safe will tip away from safety.

gfo 10y ago
I'm in the same boat right now - I'm paying >$2k/mo in rent. I could certainly wait to get the full 20% down payment, but it makes more sense to me if I buy a condo now, build the equity, and down the road I can keep saving for a nicer place once I outgrow the condo. Sure I'll be mostly paying interest to start, but this way I'm at least seeing some sort of investment if I have to spend that much per month on living. I could certainly have found a roommate or a cheaper place but frankly, I've gotten used to what I'm paying now and I still have plenty leftover to contribute to a 401k, savings, and enjoy myself.
AWildDHHAppears 10y ago
If everyone had to pay 20% down, house prices would be lower.
- vibrio 10y ago
  Probably, but from an economics perspective, i'm not sure who will push that position. There seems to be plenty of Lenders willing to take a chance with someone offering a lower down payments and in turn charge them a higher rate.
  - toomuchtodo 10y ago
    Because the mortgages are backed by the US government.

douche 10y ago

With the state of rental rates at the moment, if you can scrape any kind of down payment together, it's worthwhile to buy rather than rent. Even if you are on a 3.5% down FHA loan, the mortgage + taxes + PMI is considerably less than renting the equivalent property. If you're smart, buy a duplex, and basically get your tenant to pay the mortgage for the whole building.

throwthisawayt 10y ago
Unfortunately the economics don't really work out for those in the Bay Area.
maxxxxx 10y ago
Depends on where you are though.
jandrewrogers 10y ago
That very much depends on where you live. I have a pretty thorough spreadsheet for modeling this kind of thing. Even if I had a 20% down payment, fully accounted for tax deductions, payment against principal, etc, and ignoring costs like maintenance, my lease in Seattle is significantly less than the monthly cost of a mortgage for the same place. This is true more often than people expect. Many landlords are not covering a mortgage payment as large as yours would be, or any mortgage at all, with your rent check. Their cost basis is not your cost basis so it is not unexpected that the market clearing price for rent is below the monthly cost for many people to buy the same property.
- derefr 10y ago
  > Many landlords are not covering a mortgage payment as large as yours would be Why not? I can understand already owning the property, but do property-management companies just get better mortgage rates or something? Does that mean I could theoretically save money by buying a house as a company and then renting that house to myself as an individual?
  - tinylittlefish 10y ago

loeg 10y ago

Figure 4 and 5 have the same credit groups, but opposite colors. That seems unnecessarily confusing.

millstone 10y ago

How has the ARM vs fixed mix changed? We started with a 30 year fixed, but refi'd to an ARM after we got over the conventional wisdom and noticed how much lower the rates were. We paid it off before the rate reset and ended up saving thousands.

dpark 10y ago
It really depends on your financial situation. If you've got the resources to pay off an ARM before the reset, then absolutely you should do that. Why not? If you can make the payments on the 30 year easily, then an ARM could be a good bet to save some money, but there's some moderate risk. If you're a bit stretched making a 30 year, then an ARM is probably too risky because a rate increase could push you into default. If you are able to make the payments on the ARM but not the 30 year fixed, then you probably shouldn't buy at all (at least not that property).

post_break 10y ago

Watching the loan value increase makes me realize I won't be able to afford even a dumpster with shutters. I hear about all these people buying houses without much down payment and it makes me feel uneasy.

rconti 10y ago
I felt that way in 2006. "I'll never be able to save up a down payment because the estimated down payment is going up faster than my ability to save!" In retrospect, that was a sign. (of course, I didn't learn my lesson, and bought a house in the Valley 2 years ago)

adamwi 10y ago

I find figure 7 very interesting, "Share of newly mortgaged homes by property type". I seems like a very large shift in what types of homes that are mortgaged (e.g. condos going from ~19% to ~43%). Anyone with deeper insight in this trend? As an outsider European I was not aware of such a strong urbanization trend in the US, or are there other mechanisms in play as well?

r00fus 10y ago
Could be affordability, as single-family homes become unaffordable in many markets.
throwawaylalala 10y ago
Im curious if it's because of who builds these condos and perhaps theres a management revenue fee to collect as well....
jghn 10y ago
One thought is that there's been a recent trend for folks moving back into urban areas.

rconti 10y ago

One thing they didn't mention is that jumbo loan rates have tumbled, and are, in some cases, cheaper than conforming loans. I don't know how or why that is, but it sure makes paying PMI less attractive!

desdiv 10y ago
>jumbo loan rates have tumbled, and are, in some cases, cheaper than conforming loans Here's a WSJ article¹ explaining the reason behind this weird inversion, for anyone like me who was wondering: "how is that economically possible?" ¹ http://www.wsj.com/articles/SB10001424127887323893004579055283906962194 http://www.wsj.com/articles/SB100014241278873238930045790552... Here's the pertinent section in case anyone is hit with the paywall: Conforming loans have become more expensive because federal officials, in a bid to reduce the outsize footprint of Fannie and Freddie, have raised the fees those companies charge to lenders, which translates into higher mortgage rates. Meanwhile, interest-rate volatility has driven up yields on mortgage bonds issued by Fannie and Freddie as investors brace for a slowdown in the Federal Reserve's bond-buying program, which has included those mortgage bonds. That has boosted rates on conforming loans. Jumbo mortgages, meanwhile, are increasingly kept on banks' balance sheets, which means prices aren't usually set by bond markets. "Banks have more deposits than loans today, so the desire to put that money to work, as well as the fact that it's at a very low cost, allows us to make [jumbo] loans at a very good interest rate," said Mr. Blackwell.

cloudjacker 10y ago

So many good nuggets in this analysis! "If two people wanted to buy a home together, only the lower of their two credit scores would be factored into important calculations like the mortgage’s interest rate." "Mean down payment on new mortgages by credit score tier"