MGIC Boosts Loan Limit on Non-Agency Jumbo

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MORTGAGE EXPERT
8 · 26 · 11

Ahead of the expiration of temporarily higher loan limits on agency mortgages, Mortgage Guaranty Insurance Corp. has increased the maximum loan amount on non-agency loans. The mortgage insurance company is also allowing second-home coverage in restricted markets and insuring refinances of junior liens that weren’t used to purchase the property.

On loans owned or managed by Fannie Mae and Freddie Mac, the maximum loan amount drops from $729,750 to $625,500 on Oct. 1.

The same goes for loans insured by the Federal Housing Administration.

While FHA loans are government-insured, Fannie and Freddie loans are insured by private mortgage insurance companies.

Among those insurers is MGIC Investment Corp. subsidiary MGIC.

In a bulletin Thursday, the Milwaukee-based company said that it will start insuring mortgages as high as $750,000. The higher limit takes effect on Aug. 29.

The maximum coverage on the jumbo loans is 25 percent for transactions with loan-to-value ratios of 90 percent, and 12 percent on 85 percent LTV loans.

The coverage is available on owner-occupied single-family detached properties where the borrower’s debt-to-income ratio doesn’t exceed 41 percent and credit score is at least 740. In addition, borrowers must contribute 10 percent of their own funds and need six months’ reserves.

The loans can be used for purchase or construction-to-permanent transactions. Payments and interest rates need to be fixed for at least five years.

MGIC also announced that it will now insure second homes in restricted markets up to 90 percent LTV. The minimum credit scores range from 740 to 760, while the maximum DTI ratio is 41 percent.

The mortgage insurer additionally noted that it will insure refinances of non-purchase junior liens in non-restricted markets for owner-occupied, single-family, detached properties. LTVs are limited to 85 percent, the maximum loan amount is $417,000 and the minimum credit score is 720.

Cash back to the borrower can’t exceed the lesser of 2 percent or $2000, and the maximum amount of the junior lien being paid off cant’ exceed $75,000. Junior liens need to be seasoned at least 12 months to qualify. The property cannot have been listed for sale for at least six months. If the junior lien is a home-equity line of credit, no draws can have occurred in prior 12 months.

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