Overview of Low Down Payment Options
Jumbo loans, also called non-conforming loans, typically demand that borrowers come in with a 20% down payment if you go to your local bank. Some will even offer you 10-percent down payment up to $1 million if you open a checking or savings account or move your investment brokerage accounts to their wealth division. For some it works out great while for others it is not a good option.
On the other hand, you may get a lender to approve you a lot easier for a conforming loan under $424,100 with 3, 5 or 10 percent down. It is worth noting that in certain California high-cost counties which include L.A., Orange, Ventura, San Luis Obispo, conforming loan limits are $636,150, while nearby San Diego is $612,950 in 2017.
Jumbo Loan with 10 Percent Down
Currently, getting a down payment less than 20 percent for a jumbo mortgage is becoming easier with the right mortgage company. As mentioned, traditional banks still want 20 percent or at best 10 percent down if you have a minimum FICO credit score of 720, and may offer you a discount if you move your banking to them.
Unlike the big banks, a 90 LTV jumbo loan (10 percent down) using a licensed mortgage company currently requires a minimum 680 middle FICO score up to $2 million on a single family residence that is your primary residence without moving your account.
5 Percent Down Jumbo Mortgage
Are you aware that there are a few lenders offering jumbo loans with just a 5% down payment? Yes, it is true and more details such as the maximum loan limit can be found if you click here.
These lenders offering a jumbo mortgage with only 5 percent down, or 95 percent financing are aggressive but qualifying is tougher. So, don’t worry. We are not going back to the period from 2002-2005 all over again. For those who want to put the least amount down, the guidelines to qualify have become more stringent.
As an example, a prospective buyer will need to have a middle FICO credit score of 740 and a debt-to-income ratio of 38 percent or less which includes the newly proposed financing.
Reserve Amount Needed
Another huge stipulation is centered on the PITI reserves, which means the number of mortgage payments you have liquid in case of a sudden income loss. Lenders expect you to have 12 to 24 months of the mortgage payment in an account you can liquidate if you want a 95 ltv loan (5 percent down) and 9-12 months of the payment in reserves for the 10-percent down program.
A retirement account may satisfy this requirement but only 50% of the balance may be used. So, if you have $200,000 in an IRA or 401k, only $100,000 can be deemed as your reserves. A regular brokerage account, up to 70% is allowed.
The lender figures if you have this much saved up after your down payment and closing costs, the likelihood of defaulting is low. What is interesting is sometimes the amount you are required to have in reserves may equal or exceed the amount you’d need for a 20% down payment.
Gone are the days of having only 3 to 6 months of reserves for multi-million dollar loans from the early to mid-2000s. Today’s jumbo loan programs are very attractive but you’ll need to qualify.
We can help you if you’re looking to buy or refinance in California, Colorado, Florida and Texas. In addition, you’ll still want to have a good realtor represent you on a purchase. Sure your down payment can be less, but don’t you also want someone in your corner negotiating a lower price for you.
DISCLAIMER: This is not a commitment to lend. Borrowers are subject to credit and underwriting approval. Not all borrowers will be approved for financing. Receipt of borrower’s application does not represent an approval for financing or interest rate guarantee. Restrictions may apply.