5% Down Jumbo in San Bernardino County VS FHA High Balance in LA County

Jumbo Alternative Loan VS High Balance FHA Loan

  • By Teresa Tims
  • September 12, 2019
  • 0 Comments

TheSoCalLoanPro.com with California's most Trusted Mortgage BrokerSouthern California a Home Loan Expert,  Teresa Tims at TheSoCalLoanPro.com with California’s most Trusted Mortgage Broker .

TDR Mortgage is an expert when it comes to complex financing solutions. The disconnect for Jumbo financing in the Inland Empire is one of those problems for which we have solutions.  Join me today! You may be shocked at the end the 6.5% loan AT a 2.25% HIGHER RATE is surprisingly comparable.

FHA High Balance Vs. Jumbo Alternative

Those of you looking for jumbo financing alternatives in San Bernardino and Riverside Counties such as, Rancho Cucamonga, Upland, Corona, and many more IE  areas. Often have borrowers that are looking to purchase with just 3.5% to 5% down, because they just don’t have the 15% or 20% down that jumbo financing that usually requires.

Therefore I am doing this exercise where you will join with me on a 750k Purchase. As I compare and contrast a High Balance FHA Loan In LA County at 4.25%, 30 year fixed (LA-OC have High Balance Loans and San Bernardino and Riverside DO NOT). VS  a Jumbo Alternative Loan otherwise known now as “Non-QM” for San Bernardino County at 6.5% 30 year fixed.

In the San Bernardino and Riverside County area, we have a loan limit of $484,350.

There are some tricky alternatives that you can do, an 80/10/10, 80/15/5. There are a lot of different things that you can do but it’s not the traditional conforming type of product with the low rates and the normal type of traditional financing, so you have to get alternative types of financing when you go over the conforming limits especially in areas where there is no High Balance.

THIS CONTENT HAS BEEN TRANSCRIBED AND MAY HAVE SOME TEXT OUT OF ORDER WATCH THE VIDEO FOR BETTER INSIGHT

When it comes to L.A. County, L.A has high balance, so there’s regular conforming, then there’s high balance (FHA and Conventional), and then there’s Jumbo, so in L.A. County you get a little bit of a breather.   I’m going to compare and contrast a $750,000 Purchase in San Bernardino County versus L.A. County, and go deep really looking at everything breaking out the closing costs and what to look for.

So you can see my sales price is $750,000, the taxes and insurance portion are about $10,000, and your closing costs are about $18,000, $19,000. It’s not a cheap loan but you are able to purchase 5% down, San Bernardino County, so keep that in mind while we’re going through this.

This scenario is based off someone that has like a 680 to 700 FICO, 680 to 699 to be exact. The rate can be a little bit lower and these 5% programs work ideal for people with 760 and above. Like we’ve got a gal right now, we’re doing her 5% down at 5.25% so it’s a really, really nice program. When you’re doing these 5% programs, you’re better served by really delving into your credit and we can help you, point you in the right direction for that. Everybody knows that credit is important but in these 5% jumbo alternative programs, it’s really important, but let’s get back to this compare and contrasting.

San Bernardino County Non-QM Financing

Interest rate, 6.5%, 30-year fixed, no MI, 1.5 points, you’re going to pay a processing fee, you’re going to pay an underwriting fee. Appraisal fee and all these miscellaneous charges, loan related charges. This loan actually has the taxes and insurance in it so when we come down here, the tax and insurance portion is $9,500 and the closing costs are $18,000. You need $65,000 cash to close and your payment if $5,400.

Now one of the things about the payment, I want you to keep this in mind, you’re putting 5% down. In mortgages, usually you can only not have monthly mortgage insurance if you put 20% down, so yeah it’s a high rate, but on the flip side there’s no mortgage insurance. Okay, this is jumbo alternative financing in San Bernardino County. These jumbo 5% loans, you need to have reserves, you need to have. The debt ratios are a little more strict, so these are really done on a case by case basis. Okay, so there’s that one.

Are you ready for the next one? Okay, so now this is your purchasing in. No, that’s the same one. Here we go. This is your purchasing in L.A. County or Orange County. So let’s see, let me make this bigger. Okay, so this is FHA. I picked FHA because FHA has a really great debt ratio. We can often times go up to a 56 back end. Sometimes in these high balances, you’re limited to like 49.9, they’re a little bit more restrictive.

What’s going on here in this FHA loan and this interest rate? There’s no fee. There’s no hit for that rate, so when you come down here and you look, you have your taxes are $9,000, taxes and insurance, and your closing costs are only $5,700. That’s a breath of fresh air. Obviously, you can see that this loan is superior to the other 5% down product.

THIS CONTENT HAS BEEN TRANSCRIBED AND MAY HAVE SOME TEXT OUT OF ORDER WATCH THE VIDEO FOR BETTER INSIGHT

You have your appraisal fee, now you also have something called up front mortgage insurance, which gets added on to your loan balance, so keep that in mind. We’re going to look at it when we go down here a little bit more. Okay, so all this other stuff is exactly the same. Most of this stuff down here is all the legal third party fees, title, escrow, things that you only pay one time, and then those are like your charges right here, and then you have your tax and insurance, those are recurring, so those are recurring costs and so when you look at them down here.

 

Jumbo Alternative Loan VS High Balance FHA Loan
Jumbo Alternative Loan VS High Balance FHA Loan

 

We look at like what are the true closing costs, this to me is like the cost of the credit and right here, the tax and insurance portion, and you know a lot of these factors into the APR. APR is largely unregulated so whenever you’re looking at how much something cost, please don’t pay any attention to this pre-paid or tax and insurance, that’s a big misstep when people are calculating, comparing, and contrasting. Look at the closing costs, specifically the lender fees.

When you’re purchasing a home, you’re going to pay an appraisal fee. It doesn’t matter what lender you go with. You’re going to pay a credit fee. This re-inspection fee, sometimes on FHA loans are a little bit more strict on the property conditions, so the appraiser might have to go back out there to make sure the water heater is strapped. You have a processing fee. This processing fee, that’s a lender fee. That’s purely, purely a lender fee and then another lender fee would be an underwriting fee. Those fees are pure lender fees, all the rest of this stuff is stuff that you’re going to pay anyway and you don’t have control over.

 

When you’re purchasing a property, this escrow fee, you don’t pick the escrow company, the seller does, so this fee right here, if I put $1,700 and someone else put $1,300, it doesn’t matter. I’m actually estimating correctly and the person that puts $1,300, when you get into escrow you’re going to find that they underestimated the cost of the escrow, so the escrow and title and recording fees, those are going to be what they are. There’s a trick out there that a lot of these internet lenders do is they make those fees very, very light, and so there’s a perception to the consumer that their fees are better when really you’re going to pay those no matter what.

Processing fee, lender fee. Processing fee, lender fee. Those are the two things that you’re going to be looking at and the cost to the rate. If there’s a cost or points to the rate, so those three things are the most important things.

Okay, so obviously, this is a better product, look at your payment, it’s $5,000. But now look what you have, you have monthly mortgage insurance and you have this $13,000 up front fee, so let’s just kind of go back to the other thing real fast. Let’s see, where’d it go? So let’s go back and is this really as bad as what you think? Okay, look at the payment, payment is $5,400 so it’s really not that much more than the other payment, is it?

Now look at the money, you need $65,000. You do need more money up front, so this $18,000, there’s no $13,000 in here, so the FHA lets you finance that up front mortgage insurance but you better believe you are adding it to the loan. When you really take a hard look at these two programs or products, you know just this up front money factor is really the big thing and then conventional, I don’t have a conventional one on here, but conventional is largely the same as the FHA except it doesn’t have the monthly mortgage insurance.

Anyway, so go back here. Let’s kind of revisit this one more time, right? So but I can tell you that a 4.3% rate is way sexier than a 6.5% rate. I totally get it. $13,000 funding fee that you pay in this FHA loan. So if you take $13,000 plus $5,000, really the closing costs are like almost the same, aren’t they? I mean, when you really think about it. The closing costs are almost the same. Just the payment is a little bit less with this and then obviously, you need.  So you need $25,000 less with this thing, but look at your loan amount, $737,000. Let’s go back and look at this loan amount.

 

Isn’t this fun? It’s exciting to compare and contrast loans. Okay. Earlier when I was doing it. I wasn’t even really kind of paying attention to that FHA up front funding fee. Oh look at this, so your loan amount is $712,000 here, okay? $712,000, let’s go back. $712,000, $712,000, where’d it go? What happened? Did I get a bunch of new e-mails? Okay, $712,000, go to our FHA, our loan amount is $737,000. What is that? $712,000, $737,000. $712,000 minus $737,000. That’s $25,000 difference so these loans are actually almost identical. So I can make an argument for either one so it. Really just kind of depends on your credit situation and what you got going on.

This is just one example. Being a mortgage broker, I’m able to shop different lenders and we do have a lender where if your FICO scores aren’t superior, we can place you in a little bit better product so I’m really proud to present this as an option in jumbo alternative financing in San Bernardino and Riverside County and if you’d like a custom consult and you’d like to purchase your dream home, then you need to pick up that phone and give me a call at 909-920-3500.

 

About Author: Teresa Tims

Teresa Tims is President of TDR Mortgage in Charming Downtown Upland CA. She prides herself in offering quality home loan products, competitive pricing and knowledgeable assistance when helping her clients select a home loan. Teresa is a life-long resident of the Inland Empire. Read More