Many people are waiting to purchase a home, but need to save for a down-payment in order to get the home they want. Unfortunately, property prices are going up, so as you save money, the amount you keeping increasing. This creates a losing proposition. But not an impossible situation, thanks to a high LTV jumbo loan.
Real estate financing can be an incredibly tricky and complex industry. There are many different factors at play, with percentages, ratios, and total amounts changing with the slightest adjustment.
At San Diego Purchase Loans, we understand that no two buyers are exactly alike. We all have different incomes, different assets, and different homeownership goals. Therefore, it’s important to treat each potential home buyer as unique. To do this, we offer flexible options that can be adjusted to fit different scenarios for different people.
We’d like to show you a few different scenarios where we can work with you to make sure you have the right financing for your specific needs. But first, we need to cover some important terms and concepts…
Highlights of Our High LTV Jumbo Loan Program
The Importance of Loan to Value
There are many ratios that are worked into mortgage financing. Debt-to-income ratio, for example, is often used as a reference point when looking at someone’s creditworthiness; the lower their debt compared to their income, the better.
Another important ratio is “loan to value,” and it’s important when explaining some of the highlights with our programs. Loan to value, or LTV, has less to do with the buyer and more to do with the property in question. The term loan-to-value, or “LTV”, expresses the total amount of the loan compared to the value of the property in question. For instance, if a home is valued, through a professional appraisal, at $1 million dollars, and the borrower takes out a mortgage of $750,000, the LTV is 75%. (750,000 is 75% of 1 million.)
In general, lenders like to see a low loan-to-value ratio. This is because it helps them recover their assets in the event of a default on the loan. If someone’s house goes into foreclosure, they are more likely to recover their full assets through a sale of the home if they loaned out a lower amount compared to the total value of the property.
Lenders also like to see a substantial down payment on a home purchase, especially on large mortgage loans, also referred to as “Jumbo” loans. Down payments of 20% or more help reduce the LTV ratio, which in turn reduces the risk to lenders. However, if you don’t have a 20% down payment, you can still get a loan for a home. There is, unfortunately, almost a myth about the 20% down payment, but obviously it’s possible to secure a mortgage without this larger payment.
The bottom line is this: the higher the loan to value, the more skeptical lenders become. When the LTV goes over 90%, many lenders become less likely to write a loan.
The Importance of a Down Payment
Lenders will also like to see a down payment, especially on large mortgage loans. Down payments help reduce the loan-to-value ratio, which in turn reduces the risk to lenders.
Having a large down payment also demonstrates to lenders that you are capable of saving money. While it’s not proof, it certainly shows that you are a capable, responsible person who is worthy of borrowing hundreds of thousands, or even millions, of dollars.
We understand that not everyone can generate or even want to provide a large down payment, but if you can bring something to the table, usually at least 10% of the purchase price, you’ll be more likely to get the affordable loan that you are looking for.
At RPM Mortgage Del Mar, however, we have unique highlights that allow us to work around scenarios that might otherwise cause a problem.
Now that we understand loan-to-value ratios and the importance of a down payment, let’s look at a few scenarios where we can help.
95% Loan to Value for $2 Million
Let’s say you have a 95% loan-to-value amount of $2 million. For this loan, you will need nine months of reserves, but no additional reserves are required for the other financed properties. Also, 100% gift funds are allowed when the donor is a family member, or else there must be a 5% borrower contribution. Gifts are not allowed if the loan-to-value is 90% or greater. Gift funds can be used for a down payment, closing costs, or reserves as well.
90% Loan to Value for $2.5 Million
Now let’s say you have a 90% loan to value ratio for a loan totaling $2.5 million. In this situation, it calculates to a purchase price of roughly $2.8 million and a minimum down payment of at least 10% would be required. Again, the required credit score would be 720 or greater.
In this case, the loan is structured again as a single loan, and it can be made without the need for monthly mortgage insurance. The loan would be available as a 30-year fixed-rate mortgage, but you can also choose a 5/1 ARM or work out a mortgage that has an interest-only payment option.
In this situation, there is also the option of using a first or second mortgage HELOC, which can be used on purchase prices of roughly $1.9 million with 10% down. This loan is structured as a 15% home equity line of credit if worked out as a second mortgage.
Loan of $5 Million with a Minimum of 30% Down
You can also have a loan totaling $5 million. For this loan, you will need to bring a down payment of at least 30%. This would mean the total purchase price of the property would be roughly $7.2 million. When you bring a 30% down payment, the loan is available with a fixed rate or as an adjustable rate mortgage. For more information, please call 858-353-8331 or visit sandiegopurchaseloans.com.
As you can see, there are many different options and unique scenarios where our team can make a difference.
Using Versatile, Common Sense Underwriting
At San Diego Purchase Loans, we understand the importance of personalized service. That’s why we work with every potential borrower to make sure they have as many options as possible.
As we demonstrated above, there are many unique highlights to our programs, and we have various options available to fit different scenarios. These high-LTV loans are made possible with one of two methods: either a HELOC second or a lender paid mortgage insurance, also called an LPMI.
No matter what your situation, contact our helpful team to learn more about our common-sense lending. We don’t just look at a score, we look at the entire picture to help you get approved for the affordable loan you deserve!
A very responsible and experienced professional with his highly effective team
I really enjoyed working with Chad Baker and the rest of the team. This was our first time buying a home in California and we started with unnecessary assumptions based on our previous experience as home-owners in a different state. Chad and his team were available throughout the whole process, explaining the state differences, answering all our phone calls and emails quickly and directly, and providing detailed weekly status reports so that all parties including agents knew exactly where we were in the process. Chad was very experienced and provided customized loan products for us to consider, which definitely facilitated our transaction. I recommend the Chad Baker team! ”
Excellent service!. Recently purchased a property in Northern San Diego County. Chad and his team were recommended to me to check out. The rate he acquired was a full point & a half better than the Broker I have been using for years. His team was exceptional and did great follow through. Definitely 5 star service!”
“Chad – Your team has been nothing short of amazing. Juliann has aggressively followed-up with escrow and gone out of her way to make sure things get done on schedule. Matt and I can’t express to you enough how much we’ve appreciated all of your counsel at the beginning of the process and her execution to see it through to close. As always, appreciate everything that you guys have done to see this through.”