Investment Property Jumbo Mortgage with Low Down Payment

Since I’m in California, and property values where I live and work tend to be on the, shall we say, higher side, residential real estate investors — those looking to purchase a home of 1- to 4-units to be used as an income-producing property — can sometimes be limited in their attractive jumbo mortgage options. This is especially true if they are looking to keep their down payment as low as possible. Many potential rental property buyers are told flat out that even a 20% down payment is California dreamin’, and that a jumbo loan on a duplex or triplex, for example, requires a 30 or even 35% down payment. So in addition to being known for good vibrations and sun, let’s talk about our proclivity for innovation and examine some of our low down payment jumbo mortgage programs specifically catered to investment properties.

15% Down Payment

For a property of 1 to 4 units, we’ll lend up to $1,000,000 at a loan-to-value (LTV) of 85%. This implies a max purchase price of about $1,175,000 at the highest LTV. There is no PMI on this loan.

20% Down Payment

For a property of 1 to 4 units, we’ll lend up to $1,500,000 at a loan-to-value (LTV) of 80%. This implies a max purchase price of $1,875,000 at the highest LTV.

25% Down Payment

For a property of 1 to 4 units, we’ll lend up to $2,500,000 at a loan-to-value (LTV) of 75%. This implies a max purchase price of approximately $3,300,000 at the highest LTV.

Investing in real estate can be elusive where the property values are expensive and where the buyer doesn’t have 30% or more to put down. But we strive to lead the market with loan options that can turn buyers into landlords with even half of what they may have expected to invest at the start.  Further, with the capacity to accommodate multi-unit properties, some of these lower down payment programs can and do cash flow from Day 1.  If you are on the cusp of making your first rental property purchase, get in touch any time and I’ll be happy to review your options with you.

New lease on life, 

 

Robert J. Spinosa
Vice President of Mortgage Lending
Guaranteed Rate
NMLS: 22343
Cell/Text: 415-367-5959
rob.spinosa@rate.com

Marin Office: 324 Sir Francis Drake Blvd., San Anselmo, CA 94960
Berkeley Office: 1400 Shattuck Ave., Suite 1, Berkeley, CA 94709

*The views and opinions expressed on this site about work-related matters are my own, have not been reviewed or approved by Guaranteed Rate and do not necessarily represent the views and opinions of Guaranteed Rate. In no way do I commit Guaranteed Rate to any position on any matter or issue without the express prior written consent of Guaranteed Rate’s Human Resources Department.

Guaranteed Rate. Illinois Residential Mortgage Licensee NMLS License #2611 3940 N. Ravenswood Chicago, IL 60613 – (866) 934-7283

What’s a Piggyback Mortgage?

As if! As if mortgages weren’t complex enough, now you’re going to tell me there’s such a thing as TWO mortgages stacked on top of each other — just to buy the same home you could otherwise get with one mortgage?  Are you a glutton for punishment?

OK, calm down. You’re correct about the part that adding a second, or “piggyback,” mortgage might add complexity, but you’re not quite right about the fact that our buyer could have just as easily killed the proverbial financing bird with one stone/loan. Often, when we suggest borrower consider secondary financing, aka a piggyback loan, there’s a good reason for it, and we’re going to cover the top three of them below. If you view piggyback loan options as another tool in the mortgage toolbox, then you’ll start to see the value they provide when certain circumstances arise. So let’s jump into the mud with the pig.

Avoiding PMI

Most buyers are aware that once their loan-to-value (LTV) exceeds 80% (in other words, they have less than a 20% down payment), they will be faced with private mortgage insurance (PMI). Some will therefore try to avoid this by breaking the financing into two loans, with the first mortgage at 80% of the value of the home, and the second or piggyback loan filling in the gap between the first mortgage and the buyer’s down payment. Classic example: $500K purchase price and a 10% down payment ($50K). The loan amount would be $450K and the buyer would have PMI, unless the buyer gets a first mortgage at $400K and a piggyback loan at $50K. In the piggyback example, the buyer is still going to finance a total of $450K, but because his first mortgage LTV is not over 80%, there is no PMI. Now, this same buyer will need to compare the terms of the financing. Will it be better/cheaper to go with PMI or the piggyback? Only the research will tell.

Circumventing Conventional Loan Limits

In the above example, we used a piggyback loan to avoid PMI, but what about purchase price points that would force an 80% LTV to be just above the conventional conforming loan limit? Same deal. Some of these buyers will circumvent that cutoff by using a piggyback. Today, for instance, the conforming loan limit in many areas is $484,350. But let’s say the buyer is considering a home that will sell for $675K. At 80% LTV, the loan amount would be $540K — above the conforming loan limit by $55,650. So, from time to time, we’ll see a buyer get a $484,350 first mortgage coupled with a $55,650 second mortgage and voila’, jumbo mortgage avoided.

Jumbo 80/10/10

Speaking of jumbo mortgages, especially in higher cost areas like the San Francisco Bay Area, even if you endeavor to buy a median-priced home with less than a 20% down payment, you will need a mortgage solution that often deviates from a single loan.  Jumbo 80-10-10 options have been popular in our neck of the woods since at least 2015 and the reasons for that are primarily that the terms are very competitive and there is no PMI. If a buyer wishes to purchase real estate with less than 20% down and we’re talking about price points up to $2MM, we almost always consider a piggyback loan as one of the first tier options. In some parts of my county (Marin), in San Francisco, on the Peninsula and in the Silicon Valley, one can easily find a typical residence in the $1.2MM price point. If you’re putting 10% down on something like this, you’d have a first mortgage at $960K and a second mortgage, usually a HELOC, at $120K. This would be contrasted with any other single-loan jumbo option, though as the price points increase, it gets harder to find and qualify for such programs for many buyers.

While we always try to keep matters as simple as possible, because we realize that real estate transactions are inherently complex, sometimes there’s just no good way to avoid a piggyback mortgage solution. When you find yourself in this situation, we can help and we offer a wide array of both first and second mortgage programs that can be combined together to meet your needs. Oh, and when you do need a piggyback setup, we handle both loans as part of your singular process. We don’t send you out into the mud to fend for yourself on the first or second loan. We’ve got your (piggy) back.

Ha ha, charade you are, 

 

Robert J. Spinosa
Vice President of Mortgage Lending
Guaranteed Rate
NMLS: 22343
Cell/Text: 415-367-5959
rob.spinosa@rate.com

Marin Office: 324 Sir Francis Drake Blvd., San Anselmo, CA 94960
Berkeley Office: 1400 Shattuck Ave., Suite 1, Berkeley, CA 94709
*The views and opinions expressed on this site about work-related matters are my own, have not been reviewed or approved by Guaranteed Rate and do not necessarily represent the views and opinions of Guaranteed Rate. In no way do I commit Guaranteed Rate to any position on any matter or issue without the express prior written consent of Guaranteed Rate’s Human Resources Department.

 

Guaranteed Rate. Illinois Residential Mortgage Licensee NMLS License #2611 3940 N. Ravenswood Chicago, IL 60613 – (866) 934-7283

Jumbo Mortgage with 5% Down Payment

You never hear anyone say “Give it 95%!,” do you? And, curiously, when it comes to getting a jumbo mortgage, that still holds true — the vast majority of home buyers still think it takes a 20% down payment to enter the market. As of 2019, there are 34 metropolitan statistical areas (MSAs) in California that have a maximum conforming loan limit of $484,350. Another handful of counties can only get to a jumbo-conforming limit of around $550,000. So what do these homebuyers do if they have a maximum of a 5% down payment yet need to exceed the conforming or FHA loan limits? Are they shut out or can they actually buy a home with a jumbo mortgage? The good news for them is that we will continue to lend up to $650,000 with as little as 5% down (for a maximum purchase price of approximately $685,000) and we’ll pick up where their county’s conforming loan limits may leave off. And, in many cases, we can make these 95% loans without PMI, or private mortgage insurance. Using our LPMI (lender paid mortgage insurance) program, we can go to a loan amount of $850K with just 5% down, giving these buyers the reach up to a purchase price of almost $900K. Let’s dive 100% in and look at the key features of our 5% down jumbo program.

There are a few key distinctions between a jumbo and conforming loan and it’s important to understand these if you are going to purchase a property in a higher price range. All of these aspects can be sorted out at the time you get a pre-approval from us, and this process does not cost you any money or involve any obligation. Your preapproval is valid for at least 90 days and can be refreshed if your search extends beyond that time period. Let’s focus on the Big 3; FICO scores, asset reserves and debt-to-income (DTI) ratio:

FICO Minimum for 5% Down Jumbo

You’ll need a minimum 700 FICO score to get to a loan amount of $650K and a 720 FICO up to $850K. For jumbo mortgages in general, especially at a higher loan-to-value (LTV), getting down to 700 is very generous. Of course, the higher your FICO the better your loan’s rate might be, but it’s good to know you can still qualify with greater than a 700 (or 720) score.

Asset Reserves for 5% Down Jumbo

Reserves are a component of getting a jumbo loan — c’est la vie, as they say. But fortunately our 95% LTV jumbo loan does not have an onerous reserve requirement. In fact, in some cases we need just two months of reserves but for most options here, it is never greater than six months. Compared to other 90% jumbo mortgage options that require 18, 24 or 36 months of reserves, this makes qualifying far easier. Remember, reserves are calculated from your total monthly housing payment (PITI). If you have a PITI of $4000 and you have a 6 month reserve requirement, you need to have $24,000 left in your bank account(s) after you close your purchase transaction.

Debt-to-Income (DTI) for 5% Down Jumbo

Since this is a jumbo mortgage, your debt-to-income ratio will need to be under 43% in most cases. How do we arrive at this number? Let’s say you have a gross monthly income of $10,000. If your housing payment is $4000, you have a 40% “front end” or “housing” DTI ($4000 / $10,000). Let’s say you also have a car payment of $250. Now you have a debt ratio of 40% over 42.5%, and you’d still qualify. Your “total” or “back end” ratio is your proposed housing payment, plus any other monthly debts that come over from the credit report. Total debts divided by gross income equals total DTI.

The long-held belief that it takes a 20% down payment was shattered long ago when we offered competitively priced 10% down payment solutions up to price points of $2MM. Many buyers still take advantage of those programs today. But even where the price points go to $700K or even $900K, now buyers have the option to bring in only 5%, often without private mortgage insurance (PMI). If you want to know more and are intent on getting out of the rent cycle, call me today and let’s see if this program is a fit for you.

Gimme five, 

 

Robert J. Spinosa
Vice President of Mortgage Lending
Guaranteed Rate
NMLS: 22343
Cell/Text: 415-367-5959
rob.spinosa@rate.com

Marin Office: 324 Sir Francis Drake Blvd., San Anselmo, CA 94960
Berkeley Office: 1400 Shattuck Ave., Suite 1, Berkeley, CA 94709

*The views and opinions expressed on this site about work-related matters are my own, have not been reviewed or approved by Guaranteed Rate and do not necessarily represent the views and opinions of Guaranteed Rate. In no way do I commit Guaranteed Rate to any position on any matter or issue without the express prior written consent of Guaranteed Rate’s Human Resources Department.

Guaranteed Rate. Illinois Residential Mortgage Licensee NMLS License #2611 3940 N. Ravenswood Chicago, IL 60613 – (866) 934-7283

Jumbo Mortgage with an H-4 Visa

“I pledge my head to clearer thinking,

my heart to greater loyalty,

my hands to larger service,

and my health to better living,

for my club, my community,

my country and my world.”

Hold on a second! That’s the pledge for 4-H Club, Rob, and you’re supposed to be discussing the H-4 visa here. You’ve got it backwards. Ah yes….sorry about that.

The H-4 visa. This is a visa issued by the U.S. Citizenship and Immigration Services (USCIS) to immediate family members of H-1B visa holders. These individuals are not US citizens or permanent resident aliens (green card holders) but “non-permanent resident aliens.” Make special note that they are also not “foreign nationals” or “non-residents.” That aside, it is not uncommon for us to get a call from H-1B/H-4 holders who have attempted to qualify for a home loan and been told by their lender that the income from the H-4 holder cannot be considered. Naturally a married couple purchasing a home would plan to use the combined household income and often they’ve used online tools and calculators to determine their debt-to-income (DTI) ratio in this manner. However, the vast majority of lenders will not permit the income of the H-4 holder and when the spouse’s income is removed from the loan application, often a denied loan is the result. But there is hope and we do have jumbo mortgage programs that will allow H-4 income.  These programs will also allow for a 10% down payment up to purchase prices approaching $2MM.

Here in California, we will accept the income of both the H-1B and H-4 visa holder assuming, in addition to other requirements, we have the items below:

  1. Social security numbers for both borrowers.
  2. At least two years of filed tax returns in the United States.
  3. At least two years of US credit history and acceptable FICO scores.

Aside from the H-1B and H-4 visa, I am no stranger to the other types of non-permanent resident alien visas that we commonly see here in California, and they include; E-1 and E-2 visas, the L-1A and L-1B, the L2 and others. If you’re unsure if your visa type is eligible for mortgage financing, please get in touch any time.

To make the best better,

 

Rob Spinosa
Vice President of Mortgage Lending
Guaranteed Rate
NMLS: 22343
Cell/Text: 415-367-5959
rob.spinosa@rate.com

Marin Office: 324 Sir Francis Drake Blvd., San Anselmo, CA 94960
Berkeley Office: 1400 Shattuck Ave., Suite 1, Berkeley, CA 94709

*The views and opinions expressed on this site about work-related matters are my own, have not been reviewed or approved by Guaranteed Rate and do not necessarily represent the views and opinions of Guaranteed Rate. In no way do I commit Guaranteed Rate to any position on any matter or issue without the express prior written consent of Guaranteed Rate’s Human Resources Department.

Guaranteed Rate. Illinois Residential Mortgage Licensee NMLS License #2611 3940 N. Ravenswood Chicago, IL 60613 – (866) 934-7283

Finding Harmony in Unison

Ever since the woebegone days of Greenpoint Mortgage’s 400+ page rate sheet (and those who remember are laughing right now…) we in the mortgage lending industry have become accustomed to recognizing that not every borrower and not every scenario will fit exactly in the credit box. That’s just been a reality of the post-Dodd-Frank era. Lending solutions rarely “check all the boxes” and I hear myself reminding clients, not infrequently, to “not let the perfect be the enemy of the good.”

So you can imagine that when we start talking about jumbo loans and lower down payments AND add in the element of a credit blemish or two, things can get really imperfect. How can we achieve just that perfect level of harmony for the buyer? How can we create a mortgage masterpiece for the 10% down payment borrower who may not have a 720+ FICO score? The answer is the Unison program, which was formerly known as FirstREX.

Let’s cover some basics first. Unison is not a loan. It is down payment “enhancement” that typically matches a buyer’s investment. So in the classic example, the borrower will get an 80% mortgage from us, they will bring in a 10% down payment, and Unison will then match their 10% down payment for a total of 20% down. Unison’s investment comes with no monthly payments and does not need to be repaid for 30 years. When you end the Unison agreement, by purchase, refinance or buyout, you agree to pay them their initial investment plus a percentage of the value change. It’s a shift of the paradigm — instead of servicing debt each month, you are partnering with them long-term and with the understanding that sharing a fraction of tomorrow’s value is much better than not owning at all today. And to serve as a stark reminder, “today” means coming up with the full 20% down payment and bringing the credit profile to the stellar levels it would otherwise take to get a competitive loan alternative.

Now of course, the push back on the Unison program has always been, “No way! I don’t want someone else sharing in MY appreciation.” OK, fine. I hear you. But first, let’s accept that YOU don’t have any chance of appreciation if you can’t buy, and YOU are not in a position to buy without Unison’s help. And secondly, recall that I mentioned that Unison was formerly known as REX. I used to drop this line on potential REX candidates: “I understand you do not want FirstREX partnering in your purchase and potentially getting a share of your appreciation, but what if we called FirstREX ‘Uncle Rex’ instead? How would you feel then?” I didn’t usually need to wait for the answer. I could see the expressions on their faces change. It was evident that if a family member could cut them the very same bargain, most would accept. So why the resistance when we supplant a company that has the capital and wherewithal and has diligently structured such a mutually beneficial agreement? Again, it may take a more visionary mind to come to peace with how this program works. True, it’s not DaVinci’s mortgage. It’s very much the product of a new approach to an increasingly high barrier of entry to home ownership in many desirable areas.

So if you find yourself looking to buy a home with a jumbo mortgage and less than 20% down. If you find that your FICO score is 680, 700 or under 720. If you find that desirable homes in your area continue to fall just out of the reach of your buying power, it may be time to find the harmony in Unison. Call me if I can help today.

Cracking the code, 

 

 

Robert J. Spinosa
Vice President of Mortgage Lending
Guaranteed Rate
NMLS: 22343
Cell/Text: 415-367-5959
rob.spinosa@rate.com

Marin Office: 324 Sir Francis Drake Blvd., San Anselmo, CA 94960
Berkeley Office: 1400 Shattuck Ave., Suite 1, Berkeley, CA 94709

*The views and opinions expressed on this site about work-related matters are my own, have not been reviewed or approved by Guaranteed Rate and do not necessarily represent the views and opinions of Guaranteed Rate. In no way do I commit Guaranteed Rate to any position on any matter or issue without the express prior written consent of Guaranteed Rate’s Human Resources Department.

Guaranteed Rate. Illinois Residential Mortgage Licensee NMLS License #2611 3940 N. Ravenswood Chicago, IL 60613 – (866) 934-7283

Can You Use Foreign Currency to Get a Mortgage?

Is your down payment coming from abroad?

Do you have a foreign bank account that you’re showing on your mortgage application?

Are you obtaining a gift from a family member in another country?

These are all questions that might come up when we’re working with our clients who may be employed by a foreign company or who may be permanent residents (green card holders) or non-permanent resident aliens of the United States. The question really becomes, “Can I use a foreign currency to qualify for a mortgage?” We’ll look at some of the key points to navigating these international waters and assuring safe passage to home ownership here in the US.

Document Everything

Just like with domestic bank accounts, we’re going to ask you for at least two months of bank statements to support the amount of money in any account. If these statements are not in English, translation will be required. Again just as with US bank statements, if we see large deposits into the account, we’ll question their origin and need to “papertrail” how they got there.

Funds Must Be Moved to the US

Here’s perhaps the most important distinction between using US and foreign funds for a home loan transaction:  Your foreign funds must be moved to the US to be considered acceptable assets for down payment, closing costs and for reserves (more on this later). So at some point, it will be required that you convert your money to US dollars and transfer it to a US bank account. Be sure that the timing of your loan transaction works with your plans to move the money you have abroad and make sure you understand the process required by the banking institutions (and any limits for movement by the governments involved).

Allowable Institutions

Check with your lender early in the process to be certain that, for any foreign funds you plan to use, the country of origin is not sanctioned by the Office of Foreign Assets Control (OFAC). As of this writing, countries on the OFAC list are the Balkans, Belarus, Burma, Cote D’Ivoire, Cuba, Democratic Republic of Congo, Iran, Iraq, Liberia, North Korea, Sudan, Syria and Zimbabwe. This list will change periodically.

Foreign Reserves?

If seeking a jumbo mortgage, asset reserves are required. In most cases, it’s not possible to use foreign assets to meet a reserve requirement. In order to cover reserves with a foreign currency, borrowers would most certainly need to consider moving the money to the US first.

We’ve successfully helped buyers use funds held in foreign accounts to obtain FHA, conforming and jumbo mortgages in the United States. But their use definitely requires some additional planning and documentation — in addition to a currency conversion. We’re available to help make sure your foreign assets are moved and documented in the most efficient manner and that your escrow closes smoothly and on time. Regardless of your time zone, call on us if we can be of service.

Buon viaggio,

 

Robert J. Spinosa
Vice President of Mortgage Lending
Guaranteed Rate
Cell/Text:  415.367.5959
rob.spinosa@rate.com
NMLS: 22343

Marin Office: 324 Sir Francis Drake Blvd., San Anselmo, CA 94960
Berkeley Office: 1400 Shattuck Ave., Suite 1, Berkeley, CA 94709

*The views and opinions expressed on this site about work-related matters are my own, have not been reviewed or approved by Guaranteed Rate and do not necessarily represent the views and opinions of Guaranteed Rate. In no way do I commit Guaranteed Rate to any position on any matter or issue without the express prior written consent of Guaranteed Rate’s Human Resources Department.

Guaranteed Rate. Illinois Residential Mortgage Licensee NMLS License #2611 3940 N. Ravenswood Chicago, IL 60613 – (866) 934-7283

Still Think You Need 20% Down? Ain’t That a Shame

Back in late 2017, with the passing of Fats Domino, we lost a rock ‘n’ roll legend and pioneer.

 

But nearly every week we lose transactions simply because of the unquestioned and untested myth that every buyer needs to bring in at least a 20% down payment, especially here in California where many of our home prices require loans that exceed the conventional and FHA loan limits. In addition to simply not recognizing that many great programs exist in order to accommodate a 10% down payment on a jumbo mortgage, here are the two other challenges we commonly see:

Getting Approved

Putting down 10% means borrowing 90% and that translates to a larger housing payment and a higher debt-to-income (DTI) ratio. I’d say that my team and I are the best in the west when it comes to understanding the programs available and the parameters our clients must meet in order to become approved borrowers. Sometimes you not only have to think outside of the ordinary credit box, you have to approach future success as if no box exists. While many of our competitors will try to shoehorn a buyer into a 20% down mortgage by having them ask family for gift funds or by suggesting they raid their 401K accounts, we’re going to focus first on what a buyer can do on her own and we’re going to determine the outside limits of her qualifying power. From there, this buyer can determine a responsible budget and strategy, but do so with more cards on the table.

Getting Into Contract

Once we have a loan pre-approved (or underwritten in advance), our next challenge will be to have our buyer’s offer seriously considered alongside the others that may come in on any desirable property. Here, we may encounter a listing agent who wants to take no chances or who is just not aware that 10% down strategies are again very viable for qualified buyers. Instead of defending a position of “Well, your buyer only has 10% down…,” we look at it as, “Our buyer is strong enough to qualify for this type of program!” And then, we back it up with a lot of experience. Winning any offer is a blend of luck and skill, but when we support one of our 10% down client offers, we do not do so from a position of weakness.

It’s a quote often attributed to Mark Twain that goes, “It ain’t what you don’t know that gets you in trouble. It’s what you know for sure that just ain’t so.”  And while we’re on the topic of “ain’ts,” it is a shame that more buyers are not aware they can win with 10% down. We do it all the time and we’re here to help them find the thrill of home ownership with less than a 20% down payment.

I’m walkin’, 

 

Robert J. Spinosa
Vice President of Mortgage Lending
Guaranteed Rate
NMLS: 22343
Cell/Text: 415-367-5959 Fax: 415-366-1590
rob.spinosa@rate.com

Marin Office: 324 Sir Francis Drake Blvd., San Anselmo, CA 94960
Berkeley Office: 1400 Shattuck Ave., Suite 1, Berkeley, CA 94709

*The views and opinions expressed on this site about work-related matters are my own, have not been reviewed or approved by Guaranteed Rate and do not necessarily represent the views and opinions of Guaranteed Rate. In no way do I commit Guaranteed Rate to any position on any matter or issue without the express prior written consent of Guaranteed Rate’s Human Resources Department.

Guaranteed Rate. Illinois Residential Mortgage Licensee NMLS License #2611 3940 N. Ravenswood Chicago, IL 60613 – (866) 934-7283