It is now possible to get a Jumbo loan immediately after a short sale or foreclosure in Orange County, California. And while this is hard to believe given how stringent mortgage guidelines have become over the past few years, this program is for real. And while the guidelines for this program allow for the new purchase to be immediately after the short sale or foreclosure, there are guidelines that need to be met. This is not a 5% down program, and is not a program for borrowers with otherwise poor credit and no money in the bank. But for someone who just lost their home but has quickly gotten back on their feet, this is just about the only option available. And it is NOT hard money.
Mortgage after Foreclosure, Short Sale, or Deed in Lieu
While the wait period is only one day, it is important to note that there can only be one “event”. Meaning that there cannot have been two short sales, or one short sale and one foreclosure. A borrower will not qualify if they have lost multiple properties. This means that for those home owners who may have lost a second home/vacation property, or lost a rental property, there is now a good loan option when it comes time to buy a property. This program is only for Primary homes and is only for purchases. It is not allowed for second homes or investment properties.
What about a Mortgage after Bankruptcy? Mortgage Late? FICO Score?
It is also possible to get this loan after a bankruptcy, but there is a two year wait period from the time of the bankruptcy discharge. And of course credit must be re-established. The minimum FICO score allowed is 660, which is easy to attain two years after a bankruptcy, but may not be as easy immediately after a foreclosure, especially since there would have been mortgage lates leading into a foreclosure. So, while mortgage lates are acceptable and pretty much expected on this program, the borrower may need some credit repair work in order to get the FICO score to 660 if they are trying to buy a home 1 day after a foreclosure.
What is the maximum Loan Amount and Minimum Down Payment Requirement?
The maximum loan amount is $4,000,000, which would require a 35% down payment. This means that someone buying a $6,000,000 property in Newport Beach could get a $3,900,000 loan, even if they recently had a foreclosure or short sale. Up to a $3,0o0,000 loan would require a down payment of 30%. Up to a $2,000,000 loan would require a 25% down payment, and up to a $1,000,000 loan requires 20% down payment. This means that someone who just had a short sale could buy a home for $1,250,000 with 0nly 20% down.
The down payment needs to come from the borrowers own funds. Gift are not allowed and non-occupying co-borrowers are not allowed. Assets are a very important aspect to this program. The borrower must have 6 months reserves after the close of escrow. That is, 6 months of the full mortgage payment needs to be either in a bank account, retirement account, or business account. There are special requirements if the assets being used for the down payment are coming from a business account or retirement account which must be met, but just remember, no gift. The lender will request two months bank statements, and any deposits need to be “sourced and seasoned”. A potential home buyer should not move money around in the months leading up to a home purchase in order to make the loan process easier.
This is a “Full Income and Asset Documentation” program. This means borrowers will need to provide at least two years tax returns, one month of paystubs, and two months bank statements. Self employed borrowers would also need to provide two years business tax returns. But don’t worry, the lender can provide a thorough list of the items that are required, which will be in line with the typical requirements for a Conventional loan. This is not a “Stated Income Jumbo Loan“. The income will be documented and a debt to income ratio should not be higher than 43%.
What Type of Loan Program is Available?
As mentioned earlier, this is not a “hard money” loan program. Hard money/private money is known for high interest rates and fees. A hard money loan can sometimes come with double digit interest rates and huge fees. This program is actually a fairly “conventional” loan program. And as is typical with Jumbo loan programs, the two options are either a 5/1 adjustable rate mortgage (ARM) or a 7/1 ARM, amortized over 30 years. Interest only payments are not allowed. There is a “Soft Prepayment Penalty” if the loan is paid off in the first year. A soft penalty means that if the property is sold in the first year then the penalty is waived.
This mortgage is truly one of those “niche” programs. There have been so many high net worth former homeowners in Orange County who have not been able to buy a home over the past couple years that this program will work perfectly for. The first step is to contact an Orange County Jumbo Loan specialist. The lender will be able to provide accurate and detailed loan scenarios based on the qualifications of the buyer, which is a critical step that will help prevent unnecessary “surprises” at the closing table.
Authored by Tim Storm, an Orange County, CA Jumbo Mortgage Loan Officer – Please contact my office at Emery Financial Group for more information about an Orange County, CA Jumbo Mortgage. 949-640-3102.
Contact us for your Orange County Jumbo Mortgage:
949.640.3102 | tstorm (at) Emeryfinancial.com