Case Study: An Unconventional Problem with Two Conventional Solutions
These days, there seems to be an endless number of places for borrowers to try to get financing for a new home. If they have flawless credit and a perfect debt-to-income ratio, it can be pretty easy to qualify for a loan, but if any one of a hundred different things does not fit the ideal borrower’s profile, it can be much less easy. After the 2008 housing bubble disaster, it makes sense borrowers would have to contend with stricter guidelines to qualify for a loan. Unfortunately, sometimes people who are completely capable of affording their dream homes struggle to get financing because their personal goals don’t align perfectly with the priorities of a robo-lender or corporate bank. They need the kind of creative mortgage financing solutions the Mortgage Brothers can provide.
Those other lenders aren’t interested in looking closer at the situation. They’re not invested in the borrower. For them, it’s a numbers game. For the Mortgage Brothers, it’s different. We serve the borrower, not the lender. We’re willing to put in the extra time it takes to understand our customers’ unique situations because we want them to come back to us the next time they need a loan. This is what happened recently when one of our former customers came back to us to help him solve an admittedly unconventional problem.
Our client came back to the Mortgage Brothers in hopes of getting pre-approved for a $1M home. He had just paid off the $700K mortgage on his current house and had enough money saved up to put 20% down on the new one, BUT he didn’t want to sell that home until after he bought the new one. He had a few other requirements as well. His goals were to:
- finance $800K at the best rate possible
- make a lump sum principal-reduction payment after the sale of his current house that would decrease the amount (as opposed to the number) of his monthly payments
- avoid a pre-payment penalty
- The best rates are reserved for 15-year conventional loans, but “jumbo” loans (loans over $453,100) are considered unconventional. Typically, jumbo loans have higher interest rates and more approval requirements.
- It’s not possible to make a lump sum payment and lower the monthly payment amount on a jumbo loan
- His base income (around $300K /year) might not show an acceptable debt-to-income ratio. We would have to factor in performance bonuses, which are not guaranteed income.
The conventional (i.e.”standard”) solution to this problem is to put the client into a “jumbo” loan and explain why he can’t always get what he wants. We chose to a different kind of “conventional” solution to the problem and were able to get our client everything he wanted.
Thanks to his 20% down payment, we were able to get our client the best interest rate on his money by getting him approved for two (2) conventional, 15-year mortgages instead of one jumbo loan. We made the first loan for $453,100 (the upper limit for conventional loans) and the second to covered the balance of the $346,900. Upon the sale of his current home, he would take $500k to pay off the second loan entirely (with no prepayment penalty), pay down $153, 100 of the principal on the first loan, and then recast (rather than refinance) the first loan to lower the payment amount while maintaining the 15-year term.
As we said at the beginning, this was an unconventional case. Most home buyers don’t have the ability to put down $200K on a million dollar home while hanging on to second home worth $700K. Nevertheless, our experience has been that every home buyer could benefit from the kind of personal attention that we at the Mortgage Brothers are willing and able to provide.
Call the Mortgage Brothers today!
Call us today and speak with Tom or Eddie–the actual brothers behind our name. Whether you’re a realtor who wants to close more sales or a home buyer with a history who wants the best possible loan you can get, we want to help you reach your goal. Don’t hesitate to call us and see what kind of creative mortgage financing solutions we can come up with for you.