Which loan program is best for your client?
Conventional loan is the most popular loan in the South Bay. These loans are underwritten to Fannie/Freddie guidelines and are up to $625,000. A Borrower needs a minimum credit score of 660, a max debt to income ratio (DTI) of 50%, and a down payment of 5% to 417,000 and 10% down to 625,00. Conventional loans currently have the lowest interest rates of any loan.
FHA loan amounts are up to $729,750. These loans offer low interest rates, however mortgage insurance is very expensive (1% upfront costs and an added 1.10% monthly cost for the life of the loan). Need a minimum credit score of 640 and a max DTI of 50-55%. These loans are primarily issued for first time buyers with a low credit score.
Jumbo loan amounts are up to 5,000,000+. This requires at least 20% with a credit score of 700 and above with a max DTI of 45%. There are no government guarantees. These loans are underwritten to individual investor standards and each bank/investor have different guidelines. High end buyers will typically use a jumbo loan.
In the current real estate market, sellers want qualified buyers. A Seller wants a 20-25% DP buyer rather than a FHA buyer because an FHA buyer is considered risky and ultimately, the deal has a higher probability of falling through.
*This helpful information was provided by Grant Norris of RPM Mortgage.