What are the Requirements for a 5% Down-payment Jumbo?
Today we’re going to be talking about Low Down Payment Jumbo Mortgages. They’re great new options out there starting at only 5% down, so go ahead and get into that. A couple of reasons why you’d want to do a Low Down Payment Jumbo. Most of these are pretty self-explanatory. A couple of them that I want to touch on. Number two is a big one I think. Say you’re purchasing a $2 million home, if you’re using 20% down, that’s $400,000. At 5% that’s $100,000. At least $300,000 that you could use to fix up that home and personalize it, make it what you want. A lot of times if you use it smartly, you can fix up the kitchen, bathrooms. You can add a lot of value to the home, and still have as much equity as you would have otherwise but then it’s going to be exactly the way you wanted it.
Number four, I think is a good one too. You can use the funds for other investments so that couple hundred thousand can be in the bank earning interest. It could be in stocks, it could be in an investment property. All things making money instead of sitting inside of your home. Your home’s going to appreciate at the same rate whether or not you’ve put down 5% or 95%.
Basic requirements, 5% Down Jumbo is the minimum unless you have a VA Entitlement, that’s a whole different deal. That one requires a 740 middle FICO score, so pretty high FICO requirement on that. No gifts are allowed with only 5% down when You go to a $2 million loan amount, which gives you about $2.19 million purchase price with the 5% down. You’re going to need nine months reserves on that. If you go up to 10% down then it’s a lot more flexible on the credit score, loan amount, what you can use gifts for. That one’s great because you can use a 100% gifts for all the down payment, reserves, closing costs, everything. So first time home buyer, who was buying a jumbo, which we see out here in California fairly often, would be able to use this. Nine months reserves are usually required for that. One neat thing about the 10% down is you can take … All of that can be gifts so you can wire all that, the whole thing and escrow, and then after closing all those reserves will come right back to you. So pretty neat feature that loan.
So what about credit? Five percent down Jumbo, again, it’s going to be a little bit stricter than 10. You’re going to need four years after a short sale, foreclosure, bankruptcy. Most people that went through are, but some people are not right now. That’s going to require a 740 minute FICO score, so if you did have one of those, probably going to have to pretty clean credit, otherwise. Ten Percent Down Jumbo, two years after short sale, foreclosure, bankruptcy would be the minimum, and a 660 mid-FICO score, would be required on that. And that’s not all of the other credit requirements, but that’s the basics. The 10% down it’s going to have a lot more flexibility than five.
And what do I mean by reserve? So what that is just showing that you have extra funds available after closing. You can use retirement, stocks, checking, savings that’s calculated by the number of months that are required by the program times a full-payment. So do you get to keep those funds? You don’t have to give them to anyone. All you have to do is show the statement, and you’re good to go.
And what about debt-to-income ratio requirements on this? Quite simply that is just your monthly debts divided by your monthly gross income. So if you make $20,000 a month and you have $10,000 a month in expenses, that’s a 50% debt-to-income ratio. So the 5% down and it requires a 43% or less, that’s income ratio and 10% we can go as high as 55%, were the exceptions. Most time it’s 50, but we can go up to a good five sometimes.
And what if you want more info? You can give us a call, (925) 322-0436 speak with an adviser. Just be a no pressure consultation, or you can go to the fivedownjumbo.com and that’s going to have a little bit more info on there. There’re also links to get a quick quote on it if you’re just curious about what kind of rates there are you can do that. Otherwise, we hope to hear from me soon.