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 San Diego Purchase Loans Programs
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. Loan to value expresses the total amount of the loan compared to the property in question. If a home is valued, through a professional appraisal, at $1 million dollars, and the borrower takes out a mortgage of $750,000, the loan to value 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.
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 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 San Diego Purchase Loans, 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 $1.5 Million
Let’s say you have a 95% loan-to-value amount of 1.5 million. This means the total purchase price of the property is $1,578,947 with a minimum down payment of 5%. In this case, the minimum credit score required would be 720. To make this work, we would structure the loan as a single loan without the need for monthly mortgage insurance, which is a protection against default. If you were to seek this type of loan, you would have the option of either a 30-year fixed-rate mortgage or a 5/1 adjustable-rate mortgage (ARM). You can also work with our team to create the loan as an interest-only payment option.
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.
Purchase Price 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. When you bring a 30% down payment, the loan is available with a fixed rate or as an adjustable rate mortgage.
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.
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!
“Juliann – Thank you very much for your patience and help with everything. I can say 150% that we could not have gotten through this without you. I have been through this process before a few times BUT never have received this type of care/attention. This process is intense and you managed to humanize this life changing experience for us – rather than being a loan number. If you or Home Point ever need an official recommendation from us, you can count us in.”
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!”
“I wanted to reach out and tell you both Thank You for working so hard on my loan. I really appreciate how much effort you both put in to make it happen! Top notch, one of the best I have ever seen in the business.”