Yes, there is a way to purchase a $5,000,000 home in Orange County, California with only 10% down payment using Pledged Asset underwriting. As some Jumbo Portfolio lenders begin to re-enter the lending market with more flexible “makes sense” underwriting guidelines, higher priced luxury homes in areas like Newport Beach, Laguna Beach, and Beverly Hills should begin to see an increase in home sales.
The Pledged Asset Loan Program for Jumbo Loan Amounts
The Pledged Asset loan program allows up to 90% financing on the properties value. While most lenders that actually lend on multi million dollar homes would require $2,000,000 down payment on a $5,000,000 home, it would be possible to only put $500,000 down with a Pledged Asset loan program. The remaining $1,500,000 that would have been needed for the down payment just needs to be “Pledged” towards the down payment.
Benefits of Pledged Asset Loan for California Home Buyers
- Eliminates the need to liquidate to obtain the cash needed for a down payment.
- Avoids capital gains taxes associated with the liquidation of assets.
- Allows borrower to maintain liquidity.
- The borrower continues to benefit from any future interest, dividends, and/or appreciation of their assets.
Borrower Requirements and Other Info
The borrower does not need to own the assets being pledged. The “obligor”, who is the party pledging the assets, does not even need to be related to the borrower. The property being purchased can be a Primary home, a Second/Vacation home, or even an investor property. An important thing to remember is that the assets do not need to be withdrawn or moved from the current account, as long as the Eligible Assets are being managed by an Investment Broker/Dealer, and must be held in an account based in the US. This includes the US branch of a foreign entity. Eligible assets do not include options, warrants, IRA’s, 401k’s, annuities, insurance benefits, or 529 savings plans.
The “obligor” can continue to trade in the account. Just because the account is “pledged” doesn’t mean the account is frozen. The Pledged Asset can generally be released from the Pledge Agreement after 36 months, depending on the then current appraised value. Also, while cash or cash equivalent type accounts are treated at 100% of their value for pledge purposes, stock accounts, which have more volatility, will tend to be treated more conservatively, or at half of their current value for pledge purposes.
Authored by Tim Storm, an Orange County, CA Jumbo Mortgage Loan Officer – Please contact my office at Alpine Mortgage Planning for more information about an Orange County, CA Jumbo Mortgage. 877-786-4243 x 7.
Contact us for your Orange County Jumbo Mortgage:
877.786.4243 x 7 | tstorm (at) ochomebuyerloans.com