N/O/O: Jumbo Mortgage's Scarlet Letters
May 1, 2020
Day 46 of Shelter-in-Place
If you are a real estate investor at this time, in this market and looking for a jumbo mortgage to buy a non-owner occupied home (N/O/O), you may feel like our industry sees you with a scarlet letter(s) on your chest. Before the pandemic, everybody wanted to talk to you, but now...now, you cannot find a mortgage lender to make you a jumbo loan. Many of the options that existed before are gone. The ones that remain have been restricted, their guidelines whittled down to the ultra-conservative. Each day, you struggle to learn what's still possible in the realm of mortgage lending, because you sense that during the economically challenging months ahead, you'll come across a real estate investment opportunity. Sot at least for today, we can affirm the following:
- The conforming loan limits in most counties are $510,400 for a one-unit property, $653,550 for a two-unit property, $789,950 for a three-unit property and $981,700 for a 4-unit property. Some counties in higher cost areas have an additional tier, known as "jumbo conforming" or "super conforming" or "high balance conforming" that allows a borrower to reach higher in loan amount with a conforming loan.
- In the California Bay Area, the high balance limits go as follows; 1-unit to $765,600, 2-unit to $980,325, 3-unit to $1,184,925 and 4-unit to $1,472,550.
- One-unit properties allow a maximum 85% loan-to-value (LTV), or a 15% down payment, on an investment property purchase using a conforming loan. PMI would be required.
- Two- to four-unit properties require a 75% LTV or a 25% down payment with conforming scenarios, but remember, the conforming loan limits are higher for these properties.
- With a 35% down payment, we can lend to a loan amount of $1.5MM (purchase price of approximately $2.3MM or higher), using a jumbo mortgage.
Investment property financing, also known as financing for rental properties or "non-owner occupied" homes, is still available to the real estate investor. Once above he conforming loan limits, the options are no doubt more limited, yet still exist. If you need help navigating the world of the shunned, recruit our help today. Things will get better and we're here to help until they do.
Vice President of Mortgage Lending
Marin Office: 324 Sir Francis Drake Blvd., San Anselmo, CA 94960
Berkeley Office: 1400 Shattuck Ave., Suite 1, Berkeley, CA 94709
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