Home buyers in Florida may soon find it easier to qualify for a mortgage loan, at least where down payments are concerned. JPMorgan Chase and Co., the second-largest mortgage lender in the U.S., recently announced it would allow down payments as low as 5% on some Florida home loans.
Florida Mortgages Hard to Come By in Post-Crisis Years
During the housing boom years, most lenders were offering loans with down payments as low as 5%. Some were even peddling zero-down mortgages to select borrowers, in order to capitalize on the incredibly profitable heyday of housing.
But then came the bust. When the housing market tanked, lenders began to restrict credit by increasing their lending standards. This meant borrowers needed higher credit scores, lower debt ratios, full documentation, and larger down payments. Suddenly, it was a lot harder to obtain a mortgage.
Mortgage standards were tightened the most in the hardest-hit housing markets — namely Florida, Nevada and Arizona. In Florida, for example, borrowers were required to have more skin in the game by making larger down payments. The maximum loan-to-value (LTV) ratio rose to 90% in the post-crisis years, requiring down payments of 10% or more in most cases (FHA loans aside).
This made it harder for some Florida buyers to get a mortgage, if not impossible. First-time home buyers, in particular, were stymied by these higher standards.
But borrowers in the Sunshine State could soon find an easier, less expensive path to a Florida mortgage. At least one major lender is lowering its minimum requirement for down payments. Others may soon follow suit.
JPMorgan Chase Eases Requirements for Florida Buyers
Yesterday, Bloomberg reported that JPMorgan Chase, the second-largest U.S. mortgage lender by volume, is easing some of its standards and requirements for borrowers. In Florida, they are reducing the minimum down-payment requirement from 10% to 5% for primary residences, and from 20% to 10% for secondary residences.
JPMorgan Chase is also easing lending requirements in Nevada, Arizona and Michigan, three other states that were hit hard by the housing crisis.
According to JPMorgan spokeswoman Amy Bonitatibus, it’s a decision based on improving market conditions. “We have responded to improvements in the housing market by removing some additional requirements we put in place in hard-hit markets during the crisis,” she told Bloomberg.
Interest Rates and Home Prices Expected to Rise Further
The lower down-payment requirement is good news for home buyers in Florida. But other trends are creating a strong sense of urgency among buyers. Home prices are now rising across much of the state, and so are mortgage rates.
Frank Nothaft, housing expert and chief economist for Freddie Mac, recently said he expects to see 30-year mortgage rates hit 5% by around the middle of 2014.
The benchmark 30-year rate held steady at 4.57% this week, according to Freddie Mac’s weekly survey of the lending industry. That’s 123 basis points (1.23%) higher than where it was at the start of this year.
The easing mortgage standards in Florida, Nevada, Arizona and Michigan are the latest evidence of a housing market in recovery. In Florida, home prices are now rising in most metro areas.
According to the latest S&P/Case-Shiller Home Price Index, prices in Miami rose by 14.8% over the last 12 months of tracking (June 2012 – June 2013). Prices in Tampa rose by 11.1% over the same 12-month period. According to the monthly housing summary published by Realtor.com, the median asking price has risen in nearly all of Florida’s major cities.