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Buyers Don’t Need 20% Down to Remove the Monthly Mortgage Insurance “PMI” on a Home Purchase

March 16th, 2018

Most home buyers today assume they need to put down 20% to eliminate the monthly mortgage insurance “PMI” on a mortgage. I probably get asked this question as much as any other when it comes to mortgages. With Conventional financing, you only have to put down 5% to remove the monthly PMI on a home purchase up to $685k in San Diego, and $715k in LA and Orange County for example. Instead of waiting to save up more money for the down payment to try and purchase a home while home prices and rates continue to rise, you can put down as little as 5% with this program. Check out how to qualify below.

Check out Saturday’s San Diego Union Tribune

If you read the San Diego Union Tribune, check out Saturdays Home Pride section. I was interviewed for a piece discussing the current housing market for home buyers.

Buy a Home With Less Than 20% Down With No PMI for Buyers

With Conventional financing, you only have to put down 5% to remove the monthly PMI on a home purchase.

The 5% down Conventional Jumbo mortgage with No PMI is helping lots of buyers finance a home in markets like San Diego, Orange County and LA, where a jumbo loan is needed to purchase a home.

Each county in California has it’s own conventional jumbo loan limit, click HERE to check your county loan limit, or contact me for more details.

This program also allows ALL of the down payment to be gifted, so buyers can reach out for a gift instead of having to wait and save up the full 5% down payment.

*If you put down less than 10% with FHA financing, you have to pay the monthly mortgage insurance for the life of the loan.

Purchase a $675k Home With Only 5% Down and No PMI

Let’s take a $675k home purchase and compare the savings with the 5% down Conventional Jumbo loan with No monthly PMI, versus a Conventional Jumbo loan with regular monthly PMI, and a 5% down FHA Jumbo loan with expensive monthly FHA mortgage insurance.

To calculate the total monthly PITI (principal and interest, taxes and insurance), we will use 1.2% of the purchase price to calculate property taxes, which is $675 a month, and $75 a month for homeowner’s insurance.

Option #1. The figures on the first column is a conventional 5% down loan with No PMI. The rate is 4.75% on a conventional jumbo 30 year fixed with No PMI. The total monthly PITI payment is $4,095.

Option #2. The 2nd option is a conventional 5% down loan with monthly PMI. The rate is 4.5% on a conventional 30 year fixed, the monthly PMI is $298. The total monthly PITI payment is $4.297.

Option #3. The 3rd option is a FHA 5% down loan with monthly mortgage insurance. The rate is 4.375% on a 30 year fixed rate, the monthly FHA mortgage insurance is $543. There is also a FHA funding fee of 1.75% due on all FHA loans, this fee of $11,221 is financed into the loan amount. The total FHA monthly PITI payment is $4,556.

Option #1 with No PMI will help you obtain the lowest monthly payment. It will save you $202 a month over the conventional loan with PMI, and saves $461 a month over the FHA loan.

As you can see below, over the next 10 years the conventional loan with no PMI will save $17,506 over the conventional loan with PMI, and $57,594 over the FHA loan.

In Summary. To obtain the lowest monthly payment and the most long term savings, the conventional jumbo loan with No PMI will get you the lowest monthly payment.

FAQ’s for the Conventional Jumbo 5% Down Mortgage with No PMI

Here is a list of frequently asked questions and answers that realtors and buyers have on the conventional jumbo 5% down loan option with No PMI.

1. What is the maximum loan amount with the Jumbo 5% down program?

The maximum loan amount with 5% down is $679,650 for for Orange Co and LA County and SF, San Diego is $649,750. You can check your county loan limit HERE.

2. Can I receive the 5% down payment as a gift?

Yes, all of the 5% down payment can be gifted on this program. Closing costs and reserves can also be gifted if needed. We can also give a lender credit to help pay closing costs too.

3. What credit score is required to qualify for this program?

We require a 620 credit score to qualify for conventional financing. A 680 score is required to remove the monthly PMI depending on what your down payment is. Please note, the lower the credit scores the higher the interest rate will be.

4. How do you eliminate the monthly mortgage insurance “PMI’ option on this program?

It’s very simple. All you have to do is take a slightly higher interest rate than normal, say from 4.5% to 4.75%, and we use a lender credit with the higher interest rate to eliminate the PMI from the mortgage payment. This is also known as lender paid mortgage insurance.

5.  Can I get 5% down with No PMI on 2nd homes or Investment Properties?

No, the 5% down is for Primary Residences only. You have to put down 10% for a 2nd home and 15% down for an investment property. The NO PMI option is also available on both.

7. Are co signers allowed on this program?

Yes co-signers are allowed on this program, the co-signer does NOT have to reside in the home.

8. Is this program for first time buyers only?

No, this program is available to all buyers.

9. Do condos qualify for this program?

Yes, you can also purchase a condo using this program with only 5% down and get the No PMI option.

10. What is the maximum number of units for a home with the 5% down payment mortgage?

The 5% down mortgage is for single-unit homes only. This includes single-family detached homes and single-family attached homes such as condominiums and town homes. 2-unit homes, 3-unit homes, and 4-unit homes cannot be financed with the conventional 3% down mortgage.

11. What if I put down 10% or 15%, will I get a lower rate?

Yes, if you put down 10% or 15% as a down payment, you will get a lower interest rate. With conventional financing, the larger the down payment, the lower the interest rate you will get.

If you have any questions about any of these programs or getting approved for financing, please feel free to contact me at 858-442-2686. I look forward to chatting soon.

P.S. Please join my Facebook page if you would like to be updated faster on any new loan program changes or industry news.

Own vs Rent for $3600 a Month: Buy a $600k Home With 5% Down and No PMI

February 10th, 2018

Instead of renting for $3,600 a month, did you know you can purchase a $600,000 home with only 5% down with No monthly mortgage Insurance “PMI” for the same monthly payment. When you factor in all the financial benefits and tax deductions you get to take advantage of when you own a home, it is cheaper to own a home versus rent in many parts of California. Check out the “Own vs Rent” report below comparing renting versus owning for $3,600 a month.

Compare Owning vs Renting for $3,600 a month

There are many renters in California paying monthly rent around $3,600. What many renters don’t know is, how much home they can purchase for the same monthly payment.

Instead of paying $3,600 a month in rent to your landlord, did you know you can purchase a $600,000 home with only 5% down conventional jumbo financing with No monthly mortgage insurance “PMI”, for the same total monthly payment.

Check out this “Rent vs Own” report below comparing renting versus owning for $3,600 a month.

On the left column is the $3,600 in monthly rent.

On the right column, for the same monthly payment of $3,600 a month, you can buy a $600,000 home with a down payment of 5% using conventional jumbo financing, with an interest rate of 4.625% with NO monthly PMI. The total PITI payment is $3,600 a month, which includes principal and interest, property taxes and homeowners insurance.

As you can see above when owning a home, $733 a month will go towards paying down the principal on the loan. You will also get to claim tax benefits of $978 a month. Both of amount to $1,712 a month in total benefits.

Compare this to zero tax benefits when paying rent of $3,600 every month.

Compare Principal Paid vs Rent over 10 years

In this section of the report, it compares how much rent versus principal you will pay over the next 10 years.

By owning a home, you will have paid down the principal on your loan by $111,677 over the next 10 years.

Compare this to paying $495,240 in rent over the next 10 years with no financial benefits.

Tax Benefit Analysis Over Next 10 years

As you can see below, when owning a home you will be able to claim tax benefits of $978 a month. Over 10 years the tax benefits amount to $109,198.

When paying rent of $3,600 a month, there are No tax benefits.

Compare Net Worth in 10 years

In this section of the report, it compares your net worth after 10 years of owning a home versus renting.

By owning a home, you will accumulate a net worth of $348,027 over the next 10 years, from the financial benefits of home ownership.

The 3 main financial benefits to owning a home are, paying down the principal on the loan, tax deductions, and accumulated equity gains due to appreciation on the property. In this example I used a conservative 3% annual appreciation rate.

Whereas with renting over the next 10 years, you will have a zero net worth, as there are no financial benefits to paying rent.

Click HERE for more information on how to qualify for this loan program above, the 5% down conventional jumbo loan program with No monthly mortgage insurance “PMI”. There is also a Q&A section in the article too.

The Impact of Rising Rates on Buyer Purchasing Power in 2018

As rates have already increased over “.5” since the New Tax Bill was passed in December, it is important that buyers understand that rising mortgage rates do more to influence their home affordability than rising home prices.

Here is a good chart below to share with home buyers. It shows the “impact of rising rates on a buyers purchasing power or affordability”.

Current jumbo rates today are around 4.5% on a 30 year fixed.  If a buyer can afford $600k at a rate of 4.5% today, but rates increase by another 1%, the buyer can only afford $535,500, a loss of 10.75% in affordability.

Based on how rates are currently trading, it looks like mortgage rates may be moving towards 5% over the next several months.

Why Now is still a great time to buy a home

It’s still a great time to purchase a home, especially as the cost of borrowing money is still very low historically. The average 30-year fixed rate over the past decade was 6.7% and over 8% over the past 20 years.

When you crunch the numbers and weigh up all the financial benefits that come with home ownership, and compare it to what you are paying in rent, you will be surprised how much home you can actually afford to buy in many cases.

A good idea is to talk to your accountant and ask them what the mortgage interest deduction and deduction for real estate taxes will do for your income, you will probably find it is now cheaper to own than to rent in many areas.

Remember too, when you own a home, it is also a hedge against inflation for the future too. When you own a home, you will get a low fixed rate mortgage and your principal and interest payment will never change. Whereas rent will continue to go up over time.

In this market, it is important that buyers are been given all the information they need so they can make an informed decision about buying a home. These “Rent vs Own” reports are a great tool for buyers to review, because it shows them all the financial benefits and different figures they need to see when making the decision to purchase a home.

If you would like more information on the “Rent vs Own” report like this example above, please contact me directly at 858-442-2686. I look forward to chatting soon.

P.S. If you would like to be updated faster on any important industry news or new loan programs that come out, please join my Facebook Page.

5 Reasons to Purchase a Home Soon in 2018

January 29th, 2018

The “Cost of Waiting to Buy” is defined as the additional funds it would take to buy a home if home prices and interest rates were to continue to increase over the next 12 months. Mortgage rates have already increased “.5%” since the New Tax Bill was passed in December and are now at 3 year highs. Did you know that just a “.5%” increase in rates reduces a buyers purchasing power by 5%, which means a buyer being able to afford a $570k home instead of a $600k home with the same monthly payment. Here are 5 reasons to purchase a home soon in 2018.

1. The Extra Cost of Waiting to Buy a Home

It is important that buyers consider rising interest rates and rising home prices when thinking about the true cost of a home.  The “Cost of Waiting to Buy” is defined as the additional funds it would take to buy a home if home prices and interest rates were to continue to increase over the next 12 months.

This example below is for a $750k purchase. It shows the additional funds it would take to buy a home if rates increase from 4.02% to 4.80%, and the home price increased by 5% from $750k to $786,750.

The monthly payment will increase from $3,589 to $4,127, which is an increase of $538 a month.

This amounts to an extra $6,456 annually, and $193,680 over the life of the loan.

That means a buyer who waits a year to purchase a home, could pay an additional $193,680 in interest and payments over the life of the loan to purchase the same home.

2. Mortgage rates will continue to rise in 2018

It has been a rough ride for mortgage rates since the New Tax Bill passed, see below. Rates have already increased by “.5%” in just the past month and are trading at 3 year highs.

With the new administration talking up higher spending, lower taxes, protectionist trade policies, and deregulation all adding up to inflation (inflation is the mortal enemy of bonds and low rates), all of this is causing rates to increase.

The 10-year Treasury is one of the main drivers for the direction of long term rates. The 30-year fixed mortgage rate follows the direction of the 10-year Treasury.

As you can see below, the 10-year Treasury has broken through several ceilings of resistance over the past month, and is approaching 5 year highs around 3% from back in 2013.

If the 10-year Treasury continues to move towards 3%, it means 30-year fixed mortgage rates are going to increase another “.25%” from current levels.

If you or someone you know is planning on buying a home in 2018, or looking to refinance, it would be a good idea to try and lock in a rate soon as the current trend is for rates to continue moving higher.

3. As Mortgage Rates increase in 2018, buyer purchasing power will fall

A question that many buyers have is, “if rates continue to rise how will this affect my affordability?” 

Here is a good chart below that all buyers should review, that shows the “impact of rising rates on a buyers purchasing power or affordability”.

As you can see on the chart, when rates increase by just “.5%”, a buyer loses 5% in purchasing power. 

For example, see how the payment at the 4% rate on a $400k loan, is roughly the same payment as the 4.5% loan at $380k, a loss of 5% in purchasing power for a buyer.

If rates increase by 1%, from 4% to 5%, a buyer will lose 10% in purchasing power. This means, if a buyer can afford to purchase $600k today, but rates increase by 1%, they will only afford $540k using the same monthly payment.

4. Home Prices will probably continue to rise in 2018

Many housing experts are predicting home prices will continue to increase in 2018, and increase around 5% for most markets in California.

2018 will probably play out the same as 2017 for many California markets, where limited inventory and strong demand for homes will continue to push purchase home prices higher.

The San Diego County median home price finished 2017 at one of its highest points. The median home price was $540,000 in December, tied for second-highest of the year, capping off a year of record price gains, said real estate tracker CoreLogic.

In 12 months during 2017, the median price in San Diego increased 9.1%, outpacing the 4.2% yearly increase in 2016.

One thing to keep an eye on is the effects of the new tax law. The new tax law caps the mortgage interest deduction and the deductibility of state and local taxes, so this may impact the upper-end market in 2018. Precisely how and the extent of which remain to be seen.

5. The cost of borrowing Money is still cheap historically

Even though rates have increased over the past month and look like they will continue moving higher in 2018, the current cost of borrowing money to finance a home is still low when compared historically.

This chart below puts current mortgage rates in perspective.

Did you know the average 30 year fixed mortgage rate over the past 40 years is roughly 8.7%,and 6.29% over the past decade!

Share this chart with anyone who thinks current rates around 4% are too high. Current rates are still a gift and should be taken advantage of by anyone looking to borrow money to finance a home.

Who knows how high rates will move over the next few years. They certainly cannot stay this low forever and will one day revert to their mean.

Tips for Homebuyers

All evidence above suggests that rates and home prices are going to continue to increase over the next 12 months.  A good tip for buyers is to focus on the monthly payment and NOT the rate. Yes rates have been increasing recently, but is the monthly payment still affordable? If the payment is still affordable, do not focus on rising interest rates.

This time of year is also a great time to get out there and shop for homes. Buyers who purchase homes in the spring always note there is less competition, so you can negotiate better terms with the seller.

If you have any questions about getting approved for financing, please feel free to contact me directly at 858-442-2686. I look forward to chatting soon!

P.S. If you would like to be updated faster on any important industry news or new loan programs that come out, please join my Facebook Page.

8 Tips to Get Your Purchase Offer Accepted By the Seller

January 14th, 2018

In today’s competitive housing market where inventory is limited and multiple offers are the norm, it is important that a buyer’s offer stands out from the crowd. Buyers and agents have to be creative with their offers and also provide full transparency upfront, so the seller will feel comfortable that a buyer will be able to obtain financing and close escrow. Here are 8 tips that will help your purchase offer stand out from the crowd and get accepted.

8 Tips to Help your Offer stand out from the crowd.

Here are 8 tips that will help your purchase offer stand out from the crowd.

1. Include a personal cover letter with your purchase offer

A good idea is for the buyers to write a personal letter to the seller, so they can explain why they love the home and why they are the perfect buyers to purchase their home.

Include this letter with your offer and also include a family picture too.

If you can tug at the heart strings of the seller, they may be more inclined to choose your offer over others. Many agents and buyers tell me this strategy works like a charm!

2. Your loan approval letter verifies the type of financing

Include a loan approval letter with your offer that clearly explains what type of financing the buyer is getting and how much they are putting towards the down payment.

Make sure the loan approval letter is signed by the lender and lists their contact info too, so the seller can call and verify all the information.

If you are qualified for conventional financing and putting down 20% or more, write this into the loan approval letter, as this will usually place ahead of an offer with a lower down payment.

If you are submitting a FHA or VA offer and are using a limited or zero down payment, follow the rest of these steps below to strengthen your offer.

3. Include a DU underwriting approval with your offer

Always include a Conventional, FHA or VA DU underwriting approval with the loan approval letter to strengthen the offer.

A DU (desktop) underwriting approval is when a buyer’s loan application, credit report, income and assets have been ran through the conventional, FHA or VA automated underwriting systems and was approved.

A DU underwriting approval displays the most important information on a buyer’s profile. For example, a DU approval verifies a buyer’s credit scores, debt to income ratios, down payment amount, total assets and reserves, and the type of loan program they are approved for.

This is a great tool to discuss the strengths of the buyers profile with the seller, so they can see how well qualified the buyer is.

4. Provide proof of down payment funds

Always include proof of down payment funds along with your purchase offer.

Make sure the name on the bank statements, or any other account being used for the down payment, matches the buyers name on the contract and approval.

Always verify there are enough funds in the statements to cover the down payment listed on the offer.

If the buyer is getting a gift from a family member, provide a gift letter and proof of funds from the donor so the seller knows where the funds are coming from.

5. Close the Transaction Faster

Being able to close a transaction faster is another way to entice the seller to accept your offer in this competitive market.

For example, if a seller is reviewing 3 offers, and there is a 17 day offer, a 30 day and 45 day offer, often the seller will go with the faster closing.

My company Citywide Financial Corp can close a Conventional or FHA Purchase Transaction in 17 days, and a VA purchase in 21 days. I have a great team set up with 2 loan assistants dedicated to help close transactions fast. Contact me for more details on how we can close your transaction faster.

6. Increase your deposit

Want to show a seller how serious your offer is? Consider putting down a bigger deposit in earnest money.

This may seem risky for some, but earnest money is there for a reason. If you are uncertain about putting a “noticeable” amount of earnest money on the table, it may be a sign to the seller that you are uncertain about the house itself.

Assuming you hold up your end of the bargain and you have the right contingencies in place, it won’t cost you any more in the long run since the deposit goes towards your down payment if financing is involved.

7. Be flexible and don’t ask for any seller credits

It’s a good idea to ask the seller’s agent upfront what you can do to make the offer more enticing to the sellers.

For example, can you be flexible on the closing date for the seller?

Also, a purchase offer asking for seller credits to pay for your closing costs will usually place behind an offer that does NOT ask for any seller credits. Instead of asking the seller for a credit, we can give the buyer a lender credit to pay for some or ALL the buyers closing costs.

Another tip is to offer to pay for the sellers Owners title policy and transfer tax. These fees only amount to roughly $2,500 on a $400k home, so this is another way to sweeten the deal for the seller to accept your offer.

8. Offer one month of free occupancy. 

When purchasing a home with a mortgage, your payment doesn’t actually come due until a month after you close. Why not offer it up to your seller to sweeten the deal? A seller could very well need that occupancy and offering to pay their “rent” for a month could strengthen your offer.

In Summary

I hope you founds these 8 tips helpful. The offer that is presented the clearest, is flexible, and addresses any issues upfront, is usually the offer that stands a better chance of getting accepted.If you have any questions about any of these tips above or getting approved for financing, please do not hesitate to contact me directly at 858-442-2686. I look forward to chatting soon.

P.S. If you would like to be updated faster on important industry news or any new loan programs that come out, please join my Facebook page .

How the New Tax Bill Will Affect Mortgages and Rates in 2018

January 2nd, 2018

The new income tax bill goes into effect for tax year 2018. Many people are asking how this will effect mortgages and rates in 2018. For example, did you know the mortgage interest on a Home Equity Loan “HELOC” is no longer tax deductible under the new tax bill? I listed a summary below of the main points in the new tax bill that will affect home buyers and sellers and homeowners in 2018.

Rates Move Higher Following Passage of the Tax Bill

The new tax bill has already had an effect on mortgage rates. Rates rose to their highest level since the summer following congress passing the the tax bill, see chart below from Freddie Mac.

This is something to keep an eye on over the next month or two, as lower taxes and deregulation all add up to inflation, and inflation is the enemy of bonds and low rates.

Current mortgage rates are still very good historically. With a 740+ score and 20% equity, we can get a buyer 3.875% on a 30-year conventional fixed rate, 3.625% on a 20-year fixed rate, and 3.25% on a 15-year fixed rate.

FHA and VA 30-year fixed rates are around 3.5%.

If you or someone you know is planning on buying a home in 2018, or looking to refinance and lower the current rate, it would be a good idea to get approved for financing soon in case rates continue to increase.

The Impact of Rising Rates on Buyer Purchasing Power

Changing mortgage rates do more to influence home affordability than changing home prices. This chart below shows the impact of rising rates on a buyers purchasing power.

As you can see on the chart, when rates increase by just “.5%”, a buyer loses 5% in purchasing power. For example, see how the payment at the 4% rate on a $400k loan, is roughly the same payment as the 4.5% loan at $380k, a loss of 5% in purchasing power for a buyer.

A 1% increase in rates reduces a buyers purchasing power by 10%. For example, see how the payment at the 4% rate on a $400k loan, is roughly the same payment as the 5% rate loan at $360k, a loss of 10% in purchasing power for a buyer.

In a high cost market like San Diego for example, a 5% reduction in purchasing power means a buyer being able to afford a $570k home instead of a $600k home with the same monthly mortgage payment.

How Will the New Tax Bill Affect Mortgages in 2018?

Here are some of the main parts of the new tax bill that will affect homeowners, home buyers and sellers in 2018.

1. Downsized mortgage interest rate deduction: New home buyers would now only be able to deduct interest on the first $750,000 of mortgage debt on a newly-purchased home—down from the current $1 million threshold, but higher than the $500,000 limit the House proposed in its tax overhaul in November. The good news is that existing mortgages are grandfathered in.

The new cap would also apply to mortgages on second homes. The original House bill wanted to eliminate the deduction on second homes.

2. Interest on Home Equity Lines of Credit “HELOCs” are no longer tax deductible. This is for existing HELOC’s and new HELOC’s.

Solution. If you are looking to borrow money to pay for home renovations or payoff credit cards, doing a new first mortgage cash-out refinance will probably be a better option, as you can still deduct the interest on the loan.

3. Limit on property tax deduction: Taxpayers will no longer be able to fully deduct state and local property taxes plus income or sales taxes. Instead, the legislation allows individuals to deduct up to $10,000 in state and local income and property taxes or state and local property and sales taxes.

That means homeowners living in high-tax states like New York, California, and New Jersey for example, could see an increase in what they owe.

4. Tax break stays for home sellers: Both the House and Senate bills originally wanted to scale back a tax break for homeowners when they sell their home for profit. Taxpayers will still be able to exclude up to $500,000 (or $250,000 for single filers) from capital gains when they sell their primary home, as long as they’ve lived there for two of the past five years.

Earlier tax reform proposals would have increased the live-in requirement to five out of the last eight years, so this is good news this is staying in place.

Top 4 Low Down Payment Options for Home Buyers in 2018

There are some excellent low down payment options available to all buyers to help them buy a home in 2018. With the new higher Conventional, FHA and VA loan limits available for 2018, see HERE, here are the top 4 low down payment purchase programs available for home buyers in 2018.

1. If you need to borrow up to $453k, you can buy a home with only 1% down conventional financing with No monthly mortgage insurance “PMI”.

We can also give a buyer a lender credit to help towards their closing costs.  Click HERE here for more details how to qualify for this 1% down program.

2. If you need to borrow over $453k and up to $679k, you can buy a home with only 5% down conventional jumbo financing with No monthly PMI.

All of the down payment can be gifted too. We can also give a buyer a lender credit to help towards their closing costs. Click HERE here for more details how to qualify for this 5% down program.

3. Military buyers can purchase a home up to $679k with zero down payment. We can also give a buyer a lender credit to cover all their closing costs. Click HERE for more info on how to qualify for zero down VA financing.

4. You can buy a home with only 3.5% down FHA financing up to a loan amount of $679k. All of the down payment can be gifted too.
We can also give a buyer a lender credit to cover all their closing costs. Click HERE for more info on how to qualify for FHA financing.

If you have any questions about a loan program or getting approved for financing, please feel free to contact me at 858-442-2686.

From my family to yours, we wish you a Happy New Year. I look forward to chatting soon.

P.S. Please join my Citywide Financial Facebook Page if you would like to be updated faster on any new loan program changes or industry news.

Buy a Home Up to $715k With Only 5% Down and No PMI

December 15th, 2017

Most home buyers today assume they need to put down 20% to eliminate the monthly mortgage insurance “PMI” on a mortgage. I probably get asked this question as much as any other when it comes to mortgages. With Conventional financing, you only have to put down 5% to remove the monthly PMI on a home purchase up to $685k in San Diego, and $715k in LA and Orange County for example. Instead of waiting to save up more money for the down payment to try and purchase a home while home prices and rates continue to rise, you can put down as little as 5% with this program. Check out how to qualify below.

The Benefits of a 5% Down Jumbo Loan With No PMI

The 5% down Conventional Jumbo mortgage with No PMI is helping lots of buyers finance a home in higher cost markets like San Diego, Orange County and LA, where a jumbo loan is needed to purchase a home.

I hear all the time from buyers who tell me they assumed they needed to save up 20% to buy a home without monthly mortgage insurance. They are excited when I tell them they only need 5% down to remove the monthly PMI.

Being able to remove the monthly PMI is helping buyers obtain a lower monthly payment, and is helping alleviate the fears of having to take a loan with monthly mortgage insurance.

If you know someone who is postponing a purchase to save more money, let them know about this program.

This program also allows ALL of the down payment and closing costs to be gifted, so buyers can reach out for a gift instead of having to wait and save up the full 5% down payment.

Fannie Mae recently increased the debt to income ratio requirements to 50%, so more buyers are able to qualify for this program now.

Buyers only have to put down 5% to purchase a home up to $685k in San Diego, and $715k in LA and Orange County with No monthly PMI. Each county in California has it’s own conventional jumbo loan limit, click HERE to check your county loan limit, or contact me for more details.

*If you put down less than 10% with FHA financing, you have to pay the monthly mortgage insurance for the life of the loan.

Buy a $715k Home with only 5% Down and No PMI, vs a Loan With Monthly PMI

Let’s take a $715k home purchase and compare the savings using the 5% down Conventional Jumbo loan with No monthly PMI, versus a Conventional Jumbo loan with monthly PMI, and a 5% down FHA Jumbo loan with monthly mortgage insurance.

To calculate the total monthly PITI (principal and interest, taxes and insurance), we will use 1.2% of the purchase price to calculate property taxes, which is $715 a month, and $75 a month for homeowner’s insurance.

Option #1. The figures on the first column is a conventional 5% down loan with No PMI. The rate is  4.75% on a conventional jumbo 30 year fixed with No PMI. The total monthly PITI payment is $4,333.

Option #2. The 2nd option is a conventional 5% down loan with monthly PMI. The rate is 4.5% on a conventional 30 year fixed, the monthly PMI is $300. The total monthly PITI payment is $4,531.

Option #3. The 3rd option is a FHA 5% down loan with monthly mortgage insurance. The rate is 4.25% on a 30 year fixed rate, the monthly FHA mortgage insurance is $561. There is also a FHA funding fee of 1.75% due on all FHA loans, this fee of $11,886 is financed into the loan amount. The total FHA monthly PITI payment is $4,751.

Option #1 with No PMI will help you obtain the lowest monthly payment. It will save you $198 a month over the conventional loan with PMI, and saves $418 a month over the FHA loan.

As you can see below, over the next 10 years the conventional loan with no PMI will save $9,367 over the conventional loan with PMI, and $56,841 over the FHA loan.

In Summary. The conventional jumbo loan with No PMI will get you the lowest monthly payment on your home purchase, and save you the most money long term too.

Frequently Asked Questions for the Conventional Jumbo 5% Down Mortgage with No PMI

Here is a list of frequently asked questions and answers that homebuyers and real estate agents have on the conventional jumbo 5% down loan option with No monthly PMI.

1. What is the maximum loan amount with the Jumbo 5% down program?

The maximum loan amount with 5% down is $679,650 for for Orange Co and LA County and SF, San Diego is $649,750. You can check your county loan limit HERE.

2. Can I receive the 5% down payment as a gift?

Yes, all of the 5% down payment can be gifted on this program. Closing costs and reserves can also be gifted if needed. We can also give a lender credit to help pay closing costs too.

3. What credit score is required to qualify for this program?

We require a 620 credit score to qualify for conventional financing. A 700 is required to remove the monthly PMI. Please note, the lower the credit scores the higher the interest rate will be.

4. How do you eliminate the monthly mortgage insurance “PMI’ option on this program?

It’s very simple. All you have to do is take a slightly higher interest rate than normal, say from 4.5% to 4.75%, and we use a lender credit with the higher interest rate to eliminate the PMI from the mortgage payment. This is also known as lender paid mortgage insurance.

5.  Can I get 5% down with No PMI on 2nd homes or Investment Properties?

No, the 5% down is for Primary Residences only. You have to put down 10% for a 2nd home and 15% down for an investment property. The No monthly PMI option is also available on both.

7. Are co signers allowed on this program?

Yes co-signers are allowed on this program, the co-signer does NOT have to reside in the home.

8. Is this program for first time buyers only?

No, this program is available to ALL buyers.

9. Do condos qualify for this program?

Yes, you can also purchase a condo using this program with only 5% down and get the No PMI option.

10. What is the maximum number of units for a home with the 5% down payment mortgage?

The 5% down mortgage is for single-unit homes only. This includes single-family detached homes and single-family attached homes such as condominiums and town homes. 2-unit homes, 3-unit homes, and 4-unit homes cannot be financed with the conventional 3% down mortgage.

14. What if I put down 10% or 15%, will I get a lower rate with a larger down payment?

Yes, if you put down 10% or 15% as a down payment, you will get a lower interest rate. With conventional financing, the larger the down payment, the lower the interest rate you will get.

Refinance Tip for Homeowners

This conventional 5% down jumbo program with No monthly PMI also works the same for refinances, as homeowners with limited equity can now refinance up to 95% of their home value with No PMI. 

For example, many homeowners who bought a home over the past 12-24 months with a FHA jumbo loan and only put down the minimum down payment of 3.5%, have probably gained at least 8% – 10% equity due to appreciation in their local market. Now is a great time to eliminate the monthly mortgage insurance while home values are rising and rates are good.

This loan program will help you refinance out of your current FHA jumbo loan with mortgage insurance, and into this conventional jumbo loan option with No PMI, so you can save some extra money and get a lower monthly payment. By removing the FHA mortgage insurance, we have been saving homeowners on average $200 – $300 a month.

If you have any questions about any of these programs or getting approved for financing, please feel free to contact me at 858-442-2686. I look forward to chatting soon.

P.S. Please join my Facebook page if you would like to be updated faster on any new loan program changes or industry news.

VA Purchase Tips for Home Buyers and Real Estate Agents!

November 10th, 2017

VA financing is one of the best mortgage products available in the market today for home buyers, as the VA makes it easy for their members to purchase a home with zero down financing. This list of VA frequently asked questions and VA tips will help you understand the in-and-outs of how the VA mortgage program works. I also included 6 tips below too that you can use to help get a VA purchase offer accepted.

VA Loans by the Numbers

in 2017, 82% of all VA loans put down 0%. Here is a snapshot of who can apply for a VA loan and what type of VA financing is available.

Who is Eligible for VA financing?

A veteran is eligible for VA financing if he/she served on active duty in the Army, Navy, Air Force, Marine Corps, or Coast Guard and was honorably discharged after 24 continuous months of active duty, or the full period for which called, or ordered to active duty, but not less than 90 days (during wartime) or 181 continuous days (during peacetime).

How Much Home Can I purchase With a Zero Down VA Mortgage?

VA buyers qualify for zero down financing up to their county loan limit. For example, a VA buyer can get zero down financing in San Diego up to $612,950, $636,150 in LA county and Orange County, and $424,100 for Riverside county. You can check your county loan limit HERE .

There is only a small down payment due if a buyer needs to purchase over the county limit. On a $700k purchase in San Diego for example, the down payment due is only $21,762.

We can also give a VA buyer a 3% lender credit to cover ALL their closing costs. This means a VA buyer can purchase a home with No down payment due or closing costs either, and this also includes a credit for the appraisal fee.

What is the Minimum Credit Score to Qualify For VA Financing?

Most VA lenders require a 620 credit score to offer zero down VA financing. We have a couple of lenders who only require a 580 score to qualify for zero down financing.

Do VA Buyers Pay Any Monthly Mortgage Insurance?

VA buyers do not need to pay any monthly mortgage insurance (MI) on their loans even up to 100% of the property value, as VA loans are backed by the government.

Can VA Buyers Purchase a 2-4 Unit Property?

The VA allows their military buyers to purchase a 2-4 unit home with zero down VA financing. VA financing is for owner occupied financing, so the VA borrower would live in one unit and rent out the other 1-3 units.

You can also use the rental income from the other 1-3 units to qualify for a loan. This is a great way for VA homebuyers to start out as a real estate investor.

  • You can finance up to a loan amount of $784,700 on a 2 unit property.
  • You can finance up to a loan amount of $948,500 on a 3 unit property.
  • You can finance up to a loan amount of $1,178,750 on a 4 unit property.

How are VA interest Rates Compared to Other Loan Programs?

VA mortgage rates are the lowest in the industry and are typically .375% lower than conventional rates.

What is the VA Mortgage Waiting Period after a Foreclosure, Short sale or Bankruptcy?

Short Sale: It is only 2 years before a buyer can repurchase again using VA financing.

Foreclosure: It is only 2 years before a buyer can repurchase again using VA financing.

Bankruptcy: For a chapter 7 Bankruptcy it is 2 years and 1 year for a chapter 13, before a buyer can repurchase again using VA financing.

Tips for VA Buyers and Sellers – The Misconception Sellers Have About VA Closing Costs

There is a misconception out there that the seller must pay for some or all of a VA buyer’s closing costs. The seller is NOT required to pay ANY costs for the buyer, but is allowed to pay up to 4% for VA loans.

But there are certain “VA non-allowable” costs for which a VA buyer is forbidden to pay, (for example No escrow fees, wiring, notary, tax service or processing fees etc are allowed to be charged).

Here is a good tip to help get a VA offer accepted, so this issue of who covers these VA non allowable fees does not become an issue. Write the following verbiage in the purchase contract, so the seller is not put off by the VA offer: “Seller not responsible for any buyer closing costs, regardless of the selected loan program. All agency-related “non-allowable” costs to be borne/paid by lender”.

This means the VA Non-Allowable fees will be paid by a lender credit instead of the seller, we do this for all our VA buyers.

So now the seller will NOT dismiss the VA offer right away, does NOT have to cover any closing costs, negotiations are easier, and the buyer and seller can strike a deal.

6 Tips to Help Get Your VA Purchase Offer Accepted

Sometimes I hear from buyers and agents that it is tougher to get a VA purchase offer accepted. It is true that some sellers will look the other way when they see a VA purchase offer, due to the zero down payment “no skin in the game”, and the assumption they will also need to cover the VA closing costs. Here are 6 tips to help your VA purchase offer get accepted

1. Include a personal cover letter with your purchase offer

A good idea in this competitive housing market is for the buyers to write a personal cover letter to the seller. Include this letter with your offer that introduces the family and why they are the right candidate to purchase the home. Include a family picture too.

If you can tug at the heart strings of the seller, they may be more inclined to choose your offer over others. There are plenty of sellers who will be happy to sell their home to a military family to thank them for their service. Many agents and buyers tell me this strategy works!

2. Include a VA DU underwriting approval with your offer

Include a VA DU underwriting approval with your offer. A DU (desktop) underwriting approval is when a buyer’s loan application and credit report has been ran through the VA’s automated underwriting systems and was approved.

A DU underwriting approval displays the most important information on a buyer’s profile, which gives the seller a better idea of the strength of the buyer. For example, a DU approval displays a buyer’s credit scores, debt to income ratios, assets, reserves, any applicable down payment and the type of loan program they are approved for.

3. Provide proof of reserves/assets/down payment funds to strengthen offer

The zero down payment requirement with VA means less skin in the game. We can’t argue with this because VA allows 100% financing, so this does amount to very “little skin in the game” from a buyer.

Therefore it’s a good idea to include proof of reserves and assets and any applicable down payment funds along with your offer, so this shows the seller the buyer has applicable funds to close if any additional funds are needed to close the transaction.

4. Increase your deposit

Want to show a seller how serious your offer is? Consider putting down a bigger deposit in earnest money. This may seem risky for some, but earnest money is there for a reason. If you are uncertain about putting a “noticeable” amount of earnest money on the table, it may be a sign to the seller that you are uncertain about the house itself.

Assuming you hold up your end of the bargain and you have the right contingencies in place, it won’t cost you any more in the long run since the deposit goes towards your down payment if financing is involved.

*As a VA buyer typically qualifies for zero down financing, they will get their deposit back at closing

5. Be flexible and don’t ask for any seller credits

It’s a good idea to ask the seller’s agent upfront what you can do to make the offer more enticing to the sellers.

For example, can you be flexible on the closing date for the seller?

Also, a purchase offer asking for seller credits to pay for your closing costs will usually place behind an offer that does NOT ask for any seller credits.

SOLUTION: To make a buyers offer more competitive, the lender can pay for some or ALL the buyers closing costs with a lender credit.

How does this work? Instead of taking say a 4% 30 year fixed rate, take a higher rate of 4.25% instead, and now there is a lender credit of roughly 2% available that can be used to pay towards a buyers closing costs.

Not only is this a good negotiating tactic so the buyer and seller can strike a deal, but of course it saves a buyer money too. We present this option to all our buyers.

Another Tip. In today’s competitive purchase market, another tip is to offer to pay for the sellers Owners title policy and transfer tax. These fees only amount to roughly $2,500 on a $400k home.

6. Close the Transaction Faster

Being able to close a transaction faster is another way to entice the seller to accept your offer in this competitive market.

For example, if a seller is reviewing 3 offers, and there is a 21 day offer, a 30 day and 45 day offer, often the seller will go with the faster closing.

My company Citywide Financial Corp can close a Conventional, FHA or VA Purchase Transaction in 17 – 21 days. We have an outstanding team set up and dedicated to help close transactions fast.

If you have any questions about any of these tips above or getting approved for financing, please do not hesitate to contact me directly at 858-442-2686. I look forward to chatting soon.

P.S. If you would like to be updated faster on important industry news or any new loan programs that come out, please join my Facebook page .

How to Qualify for a Cash-Out Refinance

October 9th, 2017

As home values and home equity continues to increase in most parts of California, many homeowners are tapping into their home equity and borrowing cash-out to pay for home improvement projects, tuition for their children, or to consolidate high interest rate credit cards and save money monthly. There are 4 different mortgage programs you can use to refinance and borrow cash-out. Here is how to qualify.

There are 4 different mortgage programs you can use to borrow cash-out.

The 3 different mortgage programs you can use to refinance and borrow cash-out, are Conventional, FHA and VA financing. Here are their current cash-out refinance rules.

1. Conventional financing allows you to cash-out refinance up to 80% of the property value. Cash-out refinances are available on primary residences, 2nd homes or investment properties.

Conventional cash-out refinances also qualify for the new appraisal waiver program, see below. The rate for a cash-out refinance loan is a little higher than a non cash-out refinance.

2. FHA financing allows you to do a cash-out refinance up to 85% of your property value. The interest rate on a FHA loan is the same for a cash-out versus non-cash-out refinance.

3. VA Financing allows you to do a cash-out refinance up to 100% of your property value. The interest rate on a VA loan is the same for a cash-out versus non-cash-out refinance. There is No monthly mortgage insurance on a VA loan even up to 100% of the property value.

4. HELOC (Home Equity Line of Credit). A Home Equity Line of Credit is a 2nd mortgage behind a first mortgage. The payment is calculated using the balance on the loan. This is a good tool for homeowners, as you can borrow against the line of credit anytime you want. Ask me for more details how to qualify.

The Benefits of a Cash-Out Consolidation Refinance

A cash-out or consolidation refinance is a great way to payoff high interest rate credit cards with balances that never seem to move lower. Consolidating credit cards and other personal debts will save the average homeowner up to $300 – $500 a month.

A great idea is to reinvest the monthly savings back into the loan to pay it down faster, or you can reinvest the monthly savings back into your 401k retirement fund or a college fund for your children (see below the example).

The interest is also tax deductible when you borrow against your home, so once you consolidate all the credit cards with a new mortgage refinance, you can now write off all the interest that you were paying on the credit cards.

Check out this consolidation mortgage below that my company just funded for a client.

Our client had a rate of 4.25% on a 30 year fixed and had 28 years left on the mortgage. He had 4 credit cards that had rates over 10%. His total monthly payments including the mortgage and 4 credit cards were $2,631 a month.

We helped him refinance into a 25 year fixed at 3.99% and paid off the 4 credit cards. His new monthly mortgage payment was $2,009. This saved him $609 a month.

Our client is going to put $300 of the $609 monthly savings back into the loan each month to help pay it off faster. By doing this it will pay off the 30-year mortgage in only 20 years (see above).

He is also going put the other $300 monthly savings into a college fund for his 2 small children, so he can build a college fund to help pay their tuition costs. After 15 years his college investment fund will accumulate to $133,029 (see above).

If you are interested in reviewing a plan like this, just let me know and I can run all the numbers for you.

Top Home Renovations for Maximum Return on investment 

When planning to do renovations to your home, there is value in knowing which home improvement projects will net you the most Return on Investment. Here are the top 4 projects below that will give you the most ROI.

Borrow Cash Out to Fund the Down Payment for a New Investment Property.

Buying an investment property is one of the best financial investments you can make. With annual rents continuing to increase on average 3% – 4% in many parts of California, and rental vacancy rates at 30-year lows in most parts of California, purchasing an investment property is a great source of additional income.

As you can see below, just a 4% increase in annual rent can increase a $1,500 monthly rent up to $1,974 in just 8 years, an increase of $474, which is a 32% profit in rental income for an investment property owner.

With interest rates also still near multi decade lows, borrowers can still get a low long term fixed rate on their investment property. This is a good idea so the monthly mortgage payment never changes, but the monthly rent will probably continue to increase, which means the return on your investment will continue to increase over the long term.

Many of our clients do a cash out refinance to obtain the down payment funds for a new investment property purchase.  Check out HERE the 4 different loan programs available to help you finance and purchase an investment property. The down payment requirements are also included in this article.

Free Appraisal Waivers on Conventional Refinance Loans

Fannie Mae is offering “Free Appraisal Waivers” on Conventional refinance and purchase loans. This computerized appraisal will be used to determine the value on a home, instead of having to do a physical appraisal inspection of your home. This will save homeowners $500 out of pocket for the appraisal fee.

To determine if you qualify, we just run your loan application through the Fannie Mae conventional automated underwriting system, and their system will determine right away if your property qualifies for the appraisal waiver.

This appraisal waiver is available for cash-out and non-cash-out refinances. It is also available for primary residence, second homes, and investment properties.

Borrowers just need to have at least 10% equity in their primary residence home to qualify. Ask me for more details how to qualify for the appraisal waiver.

If you have some high interest rate credit cards or other debts you would like to consolidate, or you have some home renovation projects you would like to borrow cash-out for, or you would like to borrow funds to purchase a new investment property, just let me know and I can run some numbers for you.

I look forward to chatting soon.

 
 
 
 

Show Millennials How to Buy a Home With a 1% Down Conventional Mortgage and No Monthly PMI

June 8th, 2017

A recent survey of 2,000 Millennials revealed that 77% assumed they need to put down more than 5% to purchase a home, and 53% have not purchased yet because they don’t have enough for the down payment. A mortgage program that most Millennials are probably not aware of is the new 1% down Conventional mortgage, which means they can now purchase a home for the cost of only 2 months rent. Buyers also have the option of removing the mortgage insurance “PMI” from their payment, so they can obtain an even lower monthly payment. Check out the Q&A section below how to qualify for this program.

New Insights on Millennials and Homebuying

A recent study of over 2,000 Millennials revealed that many of them want to become homeowners, but most think they need a larger down payment than what is required to purchase a home.

Over 77% assumed they need to put down more than 5% to purchase a home, and 53% have not purchased yet because they don’t have enough for the down payment. Check out the other results below from the survey.

What most Millennials are not aware of, is that they can purchase a home today with only 1% down conventional financing, and receive an additional lender credit to cover all their closing costs.

The 1% Down Conventional Mortgage Program

The conventional 1% down mortgage is very popular with homebuyers right now, as it is helping them purchase a home with a low down payment and a low fixed rate.

To qualify for this new program, a buyer only has to come up with 1% down. Then the lender gives the buyer a 2% lender credit towards the down payment giving the buyer 3% equity at closing.

For example, a buyer in San Diego can purchase a home up to $435k. They only have to put down 1% ($4,350), the lender gives them a credit of 2% at closing, which means they will have a loan amount of $421,950, which is under the conventional loan limit of $424k.

We can also give the buyer a 2.5% broker credit to cover ALL their closing costs, which means they can purchase a home for the cost of only 2 months rent.

Buyers can also get a gift for the 1% down payment, so now prospective buyers can reach out to family and ask for a gift to help them purchase a home.

There is also an option to eliminate the monthly mortgage insurance “PMI” from the mortgage payment, so this is helping buyers obtain an even lower monthly payment. This is a great option for buyers, so now they don’t have to worry about having to remove the monthly PMI from their mortgage payment.

Please note, there is NO 2nd mortgage involved with this 1% down mortgage program, this is a regular conventional financing program.

Remember with FHA financing, if you put down less than 10% with FHA, you have to pay the monthly mortgage insurance for the life of the loan. Click HERE for a summary of the current FHA mortgage insurance rules.

 

Frequently Asked Questions for the Conventional 1% down mortgage

Here are the most frequently asked questions that buyers and real estate agents have in regards to the new conventional 1% down mortgage program.

1. What is the maximum loan amount with 1% down?

The maximum loan with 1% down is $424,100, which is the conventional loan limit.

For example, a buyer in San Diego or Orange County can purchase a home up to $435k, where the conventional loan limit is $424k. The buyer only has to put down 1% ($4,350), the lender gives them a credit of 2% at closing, which means they will have a loan amount of $421,950, which is under the conventional loan limit of $424k.

If you need to borrow over $424,100, the minimum down payment is only 5% down. You can finance up to $636,000 with a 5% down conventional jumbo loan. Click HERE for more information on how to qualify for the 5% down Conventional Jumbo mortgage with No monthly mortgage insurance “PMI”.

2. Can I receive the 1% down payment as a gift?

Yes, the 1% down payment can be gifted on this program. Closing costs can also be gifted if needed.

3. What credit score is required to qualify for this program?

We require a 700 credit score to qualify for this loan program.

4. Is the 1% down program for 1st time buyers only?

No it is available to all homebuyers. You cannot own another home at the time of closing.

5. Does a buyer have to get a 2nd mortgage or qualify for a outside down payment assistance program to qualify for this program?

No, there is NO 2nd mortgage or outside down payment assistance programs involved with this 1% down mortgage program. The borrower qualifies with a regular conventional mortgage.

6. Is private mortgage insurance “PMI” required with the 1% down mortgage program?

Yes, borrowers are required to pay private mortgage insurance “PMI” on the 1% down mortgage. The amount of monthly mortgage insurance you pay will depend on your credit score. There is also an option to eliminate the monthly PMI from the mortgage payment.

7. How do you eliminate the monthly mortgage insurance “PMI’ option on this program?

It’s very simple. All you have to do is take a slightly higher interest rate than normal, say from 4.25% to 4.5%, and we use a lender credit with the higher interest rate to eliminate the PMI from the mortgage payment. This is also known as lender paid mortgage insurance. Apples to apples the mortgage payment will be lower with No monthly PMI.

8.  Can I use the 1% down on 2nd homes or Investment Properties?No, the 1% down is for Primary Residences only. On 2nd homes, you only have to put down 10% to obtain the No PMI payment option. On investment properties this program is not available, as you have to put down 20%, which eliminates the Mortgage insurance anyway.

9. Do condos qualify for this program?Yes, you can also purchase a condo using this program with only 1% down and get the No PMI option.

10. Can I use an adjustable-rate mortgage with the 1% down mortgage?

No, the 1% down mortgage requires a 30-year fixed rate mortgage only.

11. What is the maximum number of units for a home with the 1% down payment mortgage?

The 1% down mortgage is for single-unit homes only. This includes single-family detached homes and single-family attached homes such as condominiums and town homes. 2-unit homes, 3-unit homes, and 4-unit homes cannot be financed with the conventional 3% down mortgage.

12. What if I put down 3% or 5%, will I get a lower rate?Yes, if you put down 3% or 5% for the down payment, you will get a lower interest rate. With Conventional Financing, the larger the down payment, the lower the interest rate and monthly mortgage insurance you will get.

4 other reasons the Conventional 1% down program will benefit home buyers vs FHA financing

As lots of buyers use FHA financing to purchase a home due to it’s low down payment requirements, this 1% down conventional program is a great alternative to FHA financing.

There are some other great benefits to using this conventional program vs FHA financing, as conventional buyers have more options available especially when trying to purchase a condo.

1. This conventional program is a great option for buyers in complexes that are NON FHA approved, so now you have more inventory to choose from and agents have more homes to show them!

2. This conventional program will help you afford to purchase a single family home instead of a condo, as it frees up having to pay monthly FHA mortgage insurance and HOA dues, which can amount to a combined $600-$700 a month on a typical condo. This will open up a lot more inventory you to purchase.

3. Conventional does NOT have an anti-home flipping policy, which means conventional buyers are allowed to purchase homes that are being fixed up and flipped by investors with less restrictions. So now you don’t have to worry about the FHA’s strict anti-home flipping policies. FHA buyers have to wait 90 days before they can buy a flipped home.

4. Compared to conventional financing, FHA appraisals can be a little more strict in terms of asking sellers for repairs on a property, so this is another benefit of going conventional.

If you would like to get approved for this program, or you have any questions about any of this information above, please feel free to contact me directly at 858-442-2686. I look forward to chatting soon.

P.S. If you would like to be updated faster on important industry news or any new loan programs that come out, please join my Facebook page .

Buy a $1 Million Home With a 10% Down Jumbo 1st & 2nd Combo Mortgage!

May 19th, 2017

We have a 1st and 2nd combo financing option for Jumbo homebuyers that only requires a 10% down payment on a purchase up to $1,500,000. This program allows a buyer to take out a first mortgage up to 80% of the property value, with a HELOC up to 90%, which enables the buyer to obtain the lowest overall mortgage payment. Also, if a Conventional or FHA $424,000 first mortgage or High Balance county limit is too low for the values/sales prices in your market, a buyer can now use this program by taking a conventional first mortgage with a HELOC behind it. Check out how to qualify for this program.

3 Purchase Scenarios to use the 1st and 2nd Combo Jumbo Mortgage Program

Here are 3 different purchase scenarios where buyers can use this 1st and 2nd mortgage program to take advantage of lower rates on a first mortgage, and obtain a HELOC interest only payment on the 2nd mortgage, which will give them a lower overall monthly mortgage payment.

Purchase Scenario #1

The 10% down Jumbo Mortgage Program will help more buyers with limited down payment funds, finance a home in markets like San Diego, Orange County, LA and SF counties, where a jumbo loan is needed in many areas to purchase a home.

Most jumbo programs out there require 20% down to purchase a home up to $1.5 Million. This amounts to a down payment of $300k. There are many jumbo buyers who do not have this much in funds available.

The few lenders out there that allow 10% down financing on a jumbo loan, require one loan amount up to 90% of the property value. The rate can be very high because of that.

Let’s take a $1,500,000 purchase purchase for example. Instead of having to come up with a 20% down payment and a $300k down payment, buyers can finance a first mortgage up to 80% of the property value, which is a loan amount of $1,200,000. This allows them to obtain a much lower rate.

Then they finance a HELOC for $150k behind the first. The down payment requirement is only $150k.

Purchase Scenario #2

Buyers can now finance a home up to $750k and use conventional high balance financing on the first mortgage, and a HELOC on the 2nd mortgage.

Let’s take a $750k purchase in San Diego for example. A buyer in San Diego is allowed to finance a loan amount up to $612k with conventional financing.

On this $750k purchase, the buyer will get a 80% first mortgage at $600k, this allows them to take advantage of the excellent rates available with conventional financing.

The buyer will then finance a $75k HELOC behind the first. The down payment requirement is only $75k.

Purchase Scenario #3. 

This program is also a great solution for buyers and sellers in Riverside and San Bernardino counties, where the maximum conventional loan limit is $424k and the maximum FHA loan limit is only $379,500.

Many buyers and sellers struggle to get financing in these counties due to these loan limits.

Let’s take a $525k purchase price in Riverside for example. A buyer in Riverside is allowed to finance a loan amount up to $424k with conventional financing.

On this $525k purchase, the buyer will get a 80% first mortgage at $420k, this allows them to take advantage of the excellent rates available with conventional financing.

The buyer will then finance a $52,500 HELOC behind the first. The down payment requirement is only $52,500.

Each county in California has it’s own Conventional High Balance loan limit, click HERE to check your county loan limit, or contact me for more details.

Frequently Asked Questions for the 1st and 2nd Combo Jumbo Mortgage Program

Here are the most frequently asked questions that buyers and real estate agents have in regards to this program.

1. What is the maximum loan amount?

The maximum loan amount is $1,200,000 on the first mortgage. Buyers can finance a $150k HELOC behind the first.

2. Can I receive the down payment as a gift?

Yes, all of the down payment can be gifted on this program. Closing costs can also be gifted if needed.

3. What credit score is required to qualify for this program?

We require a 700 credit score to qualify for this loan program.

4. Is this program available for 1st time buyers only?

Yes it is available to all homebuyers.

5. Is private mortgage insurance “PMI” required with this program?

There is no private mortgage insurance “PMI” required with this program. Obtaining a first mortgage at 80% eliminates the requirement for private mortgage insurance.

7. Can I use this program on 2nd homes and investment properties?

This program is available on 2nd homes, not investment properties.

9. Do condos and town homes qualify for this program?

Yes, you can also purchase a condo or town home using this program.

10. Can I use an adjustable-rate mortgage with the first mortgage?

Yes you can use an adjustable rate mortgage on the first mortgage.

Two other reasons to use this program

1. Get a HELOC, Avoid Mortgage insurance/Impounds

A HELOC 2nd mortgage is a flexible financing tool that many consumers ask for. Borrowers can take a full or partial draw. They can pay down the balance and use it again during the 10 year Draw Period.

Borrowers only pay interest on the amount drawn, so it’s a great tool for home improvement or any future financing plans.  HELOC interest is also tax deductible.

2. Borrowers that want to Purchase before selling Departing Residence.

Add a HELOC to your Borrowers Purchase transaction when they need to make a non-contingent offer. This eliminates pressure to sell departing property and allows time to stage and show departing residence for best offers.

If you would like to get approved for this program, or you have any questions about any of this information above, please feel free to contact me directly at 858-442-2686. I look forward to chatting soon.

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