Working within guidelines enables low down payment home purchase

Mortgage adviser: John Holmgren. Property: Single-family home in Oakland. Purchase price: $1.4 million. Loan type: 30-year fixed. Loan amount: $1.04 million. Rate: 4 percent with no points. Background: John Holmgren’s clients had been looking for a home for a number of months but had been frustrated by the competitive market in the East Bay. Their original goal was to buy a home for $1 million or less and to put 20 percent down to avoid mortgage insurance. Holmgren arranged a fully underwritten loan approval that reflected these parameters.

Their agent, Wendy Sanda of Kane & Associates Realtors in Alameda, identified homes that met their needs, but these homes were invariably priced at more than $1 million.

The buyers were willing to spend more than $1 million, but this presented several challenges. At that price level, a 20 percent down payment would not leave the buyers with enough funds to cover closing costs and to meet strict cash reserve requirements.

Holmgren had an answer to this with a jumbo program that allows a down payment of 15 percent but does not require mortgage insurance. The buyers had enough funds to meet reserve requirements if they could put down 15 percent instead of 20 percent.

Another challenge presented itself with that program, however, because of the need to meet stricter credit utilization requirements (that means showing enough actively used credit accounts) because of the combination of the lower down payment and the loan amount exceeding $1 million.

The buyers decided to make an offer on a $1.4 million property, and Sanda was able to secure an accepted offer, even with the competitive disadvantage of a 15 percent down payment.

While the buyers had a lengthy and favorable credit history, most of their credit accounts were closed and had not been used recently. It being too late to open new accounts, Holmgren presented a case to the underwriter to accept the buyers credit history.

The loan was approved with the new loan profile and the buyers were able to complete their home purchase. John Holmgren, Holmgren &

Associates, (510) 339-2121, john@mortgageholmgren.com.