Securing a high-value home with low down payment requires local expertise

Loan officer: John Holmgren. Property: Single-family home in Oakland. Property value: $1.55 million. Loan amount: $1,162,500 first mortgage; $155,000 second mortgage Financing terms: 10/1 adjustable rate mortgage at 3.75 percent with no points, combined with home equity line of credit at 4.49 percent Backstory: A couple of young parents working in San Francisco wanted to buy a home to accommodate their growing family.

However, they had not been working long enough to accumulate a 20 percent down payment for homes that met their needs. In the real estate market for higher-value homes, it is hard to get offers accepted with down payments of less than 20 percent because of competition from buyers paying all-cash or making substantial down payments.

The buyers’ agent, Christopher Nava with Highland Partners Real Estate in Piedmont, was able to get their offer accepted with a strategy that combined objective information about available appraisal comps for the home (to allay seller concerns that the deal would not stay together because the appraisal didn’t support the property price) and subjective information about his clients that presented them as the buyers that the seller would want to sell to.

This was coupled with John Holmgren’s strong reputation in the East Bay real estate community as a dependable lending source. Together, they reinforced the firmness of the clients’ offer.

Plenty of challenges remained. Loan underwriters scrutinize Jumbo loans, particularly when the down payment is less than 20 percent. Holmgren had to ensure that the clients demonstrated a substantial cash reserve position.

The clients’ initial preference had been to go with a program that allowed a down payment of 15 percent but did not require private mortgage insurance, as is usually the case with less than 20 percent down.

In reviewing the significant cash reserve requirements for this program, Holmgren determined that they would not meet it, so instead he suggested they structure the loan using a first mortgage for 75 percent of home price combined with a second mortgage for 10 percent. With this structure mortgage insurance is not required.

Because the clients did not expect to own their home permanently, John also suggested that they go for a 10/1 ARM rather than a 30-year fixed to reduce the interest rate.

Since rates had increased from the time the clients had begun looking at homes and the time they located one, they were happy to get a rate that was in line with their original rate expectations.

The escrow closed in 30 days.