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.
Chase’s 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 “new mortgage” will be required to make at least a 20% down payment and have a 700+ FICO score, per Reuters.
While it’s somewhat unclear what a “new mortgage” 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 “new” part refers to those who aren’t already Chase customers, such as a home buyer who doesn’t 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, it’s a pretty aggressive stance and a sign that the mortgage market lacks serious confidence at the moment.
Chase Home Lending’s chief marketing officer Amy Bonitatibus told Reuters it was “due to the economic uncertainty,” and a move that allows the company to serve its existing customers.
She also noted that it’s a temporary change, so the hope is once the dust settles, they’ll go back to more flexible underwriting standards.
New Rules Don’t 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 “DreaMaker” 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 – they don’t 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, there’s 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 isn’t willing to lend, chances are another bank will be more forthcoming.
Lastly, Chase said the move wouldn’t affect its 3% down mortgage known as the “DreaMaker,” 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 isn’t leaving the most in need behind, including its own customers and those with limited resources.
Of course, you have to wonder who’s buying a house right now given the complete lack of clarity regarding our collective future.
But it’s nice to know they’re at least leaving options on the table for some.
Read more: Why Do Mortgage Companies Want You to Refinance So Badly?
