The Low Down on Jumbo Mortgages
One thing I look forward to every year are a few, select running races. The Dipsea in June, an ultramarathon in the spring or fall, and the Tamalpa Runners TCRS series of club runs, where for $5 you can get your seat handed to you by some of the best runners, of all ages, in Marin County. But 2020 has been different and so far, COVID-19 has pretty much Clorox-wiped the calendar clean of events.
The good news is that here in Northern California and the San Francisco Bay Area, we are seeing the real estate market come back to life as shelters-in-place have eased. And some buyers who were relegated to the sidelines are again intent on making the dream of home ownership a possibility this year. But not all of them can come up with a 20% down payment, though most of them will need a jumbo loan to accommodate the price points that persist in most of our counties and towns. Can you put 10% down and still get a jumbo loan? Can you do this in the post-COVID world where many of the big banks have been reluctant to even make a 20% down payment loan? The answer is "Yes!," so let's cover exactly how you can achieve this goal.
The first thing to know is that we're going to focus on mortgages that have a great degree of stability and also have strong rates. We measure that relative to a going rate on a 30-year fixed rate loan with a 20% down payment. For this conversation, we're not interested in solving the 10% down problem with onerous rates and terms. The second thing to understand is that to get to a 10% down payment, we're going to have to go back to the tried-and-true technique known as the "piggyback" mortgage or "80/10/10." Here, we are going to do two loans instead of one. The first mortgage will go to 80% of the purchase price and the second mortgage will cover another 10% of the purchase price, allowing the buyer to use a 10% down payment. We arrange for both mortgages as part of the same process, so you don't need to work with two separate companies to buy your home.
As of June, 2020, we are able to get to a price point of $1,562,500 with a 10% down payment. Here's how this structure would look:
- Purchase price: $1,562,500
- First mortgage: $1,250,000
- Second mortgage: $156,090
- Down payment: $156,410
The first mortgage, in our example, will be either a 10/1 ARM or a 30-year fixed. The second mortgage will be a home equity line of credit ("HELOC"). This buyer will need a 750 FICO score and 12 months of asset reserves, but assuming these criteria can be met, this same client can purchase at today's great rates versus waiting to save another $150K+ before entering the jumbo market.
COVID-19 has inflicted much turmoil on our lives and on the financial markets. It's important at times like these to remember all that we still have available to us, and the 10% down payment jumbo option here is a bright spot amid a sea of uncertainty. If you find yourself in this real estate market but without a full 20% down payment, get in touch and we look forward to using our expertise to your advantage.
We go low (down payment),
Rob Spinosa
Senior 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.
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