Following in the footsteps of many other mortgage lenders of late, JP Morgan Chase has upped its minimum requirements to get a home loan.
Once again, it has to do with COVID-19, which has led to a flood of unemployment filings and a general fear that many homeowners will begin to default on their mortgages.
This has forced many big banks and mortgage lenders to tighten their belts, focusing on extending new loans to only those they see as the most creditworthy.
In case you missed it, last week Wells Fargo said it now required $250,000 in a Wells bank account to get approved for a jumbo home loan.
Chaseâs New Mortgage Guidelines
- New customers will need to come with at least 20% down when purchasing a home
- Will also need a minimum FICO score of 700 to get approved
- Move is designed to limit exposure related to COVID-19 pandemic
- Also allows Chase to focus on its refinance customers
Beginning this Tuesday, those who apply for a ânew mortgageâ will be required to make at least a 20% down payment and have a 700+ FICO score, per Reuters.
While itâs somewhat unclear what a ânew mortgageâ is, the down payment piece points to a home purchase application, as opposed to a mortgage refinance, which comes with a minimum loan-to-value ratio.
The ânewâ part refers to those who arenât already Chase customers, such as a home buyer who doesnât already have a Chase mortgage.
It might also include an existing homeowner with a mortgage owned by a bank other than Chase who is looking to refinance.
Regardless, itâs a pretty aggressive stance and a sign that the mortgage market lacks serious confidence at the moment.
Chase Home Lendingâs chief marketing officer Amy Bonitatibus told Reuters it was âdue to the economic uncertainty,â and a move that allows the company to serve its existing customers.
She also noted that itâs a temporary change, so the hope is once the dust settles, theyâll go back to more flexible underwriting standards.
New Rules Donât Apply to Existing Chase Mortgage Customers
- Only applies to new mortgage applicants at Chase
- Existing customers can take advantage of old underwriting guidelines
- Their 3% down home purchase loan known as âDreaMakerâ is also unaffected by the changes
- Move should be temporary but in the meantime simply shop with different lenders
Now some good news regarding the new rules â they donât apply to existing customers with a mortgage from Chase.
That apparently covers some four million homeowners who can continue to enjoy the usual underwriting guidelines imposed by the bank.
Of course, thereâs no need to refinance your mortgage with the bank that owns it.
In fact, it often pays to shop elsewhere and with multiple lenders to ensure you obtain the best deal.
So even if Chase or any other bank isnât willing to lend, chances are another bank will be more forthcoming.
Lastly, Chase said the move wouldnât affect its 3% down mortgage known as the âDreaMaker,â which is an agency-backed (Fannie Mae/Freddie Mac) loan program geared toward those with low- or moderate-income.
Aside from requiring just a 3% down payment, applicants need only a 620 FICO score to get approved.
In other words, Chase isnât leaving the most in need behind, including its own customers and those with limited resources.
Of course, you have to wonder whoâs buying a house right now given the complete lack of clarity regarding our collective future.
But itâs nice to know theyâre at least leaving options on the table for some.
Chase Stops Accepting HELOC Applications
- No longer offering home equity lines of credit due to COVID-19
- Move is temporary but unclear how long home equity lending will be paused
- Chase has recommended other options such as a cash out refinance
- Those who already applied will continue to see application processed, current HELOC holders can still draw from their lines
To add insult to injury, Chase has also seized accepting home equity line of credit (HELOC) applications in the face of COVID-19.
The bank posted a message on its website saying, âDue to the economic uncertainty created by COVID-19, weâre temporarily not accepting applications for new home equity lines of credit (HELOC). This will protect both you and the bank.â
You are protected by this move, according to Chase. Itâs unclear how you are protected, but rest assured you are protected.
They have recommended other mortgage refinancing options, such as a cash out refinance, assuming you want to access your homeâs equity.
The good news is those with existing HELOCs can still tap them. And hopefully they donât freeze the lines anytime soon.
Lastly, they will âcontinue to reviewâ requests for those who already applied for a HELOC.
Read more: Why Do Mortgage Companies Want You to Refinance So Badly?
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