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Why it’s getting easier to find a $3 million mortgage than a $300k one

Sales of U.S. Existing Homes Drop to Lowest in Four MonthsSales of U.S. Existing Homes Drop to Lowest in Four Months
Existing home sales reached a new eight-year high in June banishing memories of the subprime disaster.Photograph by David Ryder — Bloomberg via Getty Images

Looking for a mortgage? You may soon find it easier to borrow $3 million than $300,000.

J.P. Morgan Chase & Co. (JPM), the U.S.’s second-biggest mortgage lender is set to join Wells Fargo & Co (WFC) and others Wednesday in easing terms for ‘jumbo’ mortgages, in an effort to grab a bigger share of the higher end of the market, The Wall Street Journal reports.

The move reflects increasing competition among banks for the thriving business for larger home loans, where it’s easier to turn a profit and where borrowers are generally more reliable. By contrast, some banks are retreating from the business of making smaller mortgages, especially to poorer borrowers, as the cost of new regulation and the higher risk of litigation means the business isn’t as attractive as it used to be.


The WSJ said J.P. Morgan will cut its minimum downpayment for loans between $1.5 million and $3 million to 15% from 20% and also cut the minimum required FICO credit score required to 680 from 740 for loans tied to primary single-family purchases, second homes and selected refinancings.

That brings the blue-blood lender into line with Wells Fargo and PNC, which had both cut their minimum downpayments last year. But it’s still a far cry from the heady pre-crisis days where lenders would often waive downpayments entirely and not bother checking borrowers’ claims regarding their credit-worthiness.

The fight for the higher end of the market reflects how much better that sector is performing. While sales of single-family homes priced between $750,000 and $1 million rose 21% on the year in June, those for homes worth between $100,000 and $250,000 fell 3%, according to the National Association of Realtors. The WSJ quoted data from Inside Mortgage Finance showing that originations of ‘jumbo’ mortgages (over $417,000) were up 58% year-on-year in the second quarter at $93 billion–a level not seen since 2007. Jumbos now account for 20% of the new loan market by dollar volume, up from 5.5% in 2009.