The availability of Jumbo Loans have affected the sale of Palos Verdes real estateover $1,200,000. It is a little tricky because there are jumbo loans available at rates that match May of 2008 – 6.875%. However, the number of buyers who can qualify for those loans has been diminished because these loans must be have full income verification and the borrower must have FICO scores of 700 or above.
And the higher the purchase price, the larger the down payment required. A loan of less than $1,000,000 requires 20% down. A loan between $1,000,000 and $1,500,000 requires 25% down, A loan of $1,500,000 to $2,000,000 requires 30% down payment. Loans above $2,000,000 require a minimum of 35% down payment.
On a sales price of $2,000,000 with $500,000 down payment where the borrower has no other debt, that buyer will have to document $375,000 yearly income (which is 1% or less of the population) for a loan of $1,500,000. Additionally, the lender will require the borrower to have cash reserves post closing of at least $150,000 and those funds have to have been in the bank account for a minimum of 3 months (Retirement accounts do qualify as cash reserves.) The issue seems to be that probably half of those borrowers who are making $375,000 or above are self employed and write off business expenses to lower their income for income tax purposes. The net income figure on page one of the tax return is what the lenders use as documented income. Jumbo loans are available but fewer borrowers qualify because of the above parameters.
