Financing a higher end home typically means taking a jumbo loan instead of a conforming loan. The New Hampshire Loan Limits issued by Fannie Mae and Freddie Mac is $647,200 in most of the U.S. as of 2022, with some higher cost counties in CA, FLA, and North East slightly higher.
Loan amounts above these conventional loan limits are considered “jumbo.” Historically, most lenders processing jumbo loans ask for a down payment of at least 20 percent and even 30 percent for certain programs. When financing a jumbo purchase in New Hampshire, whether the property is located in Manchester, New Haven or Nashua, there are some very competitive mortgage programs that don’t require such a large down payment.
Consider a home listed at $850,000. A 20 percent down payment would then be $170,000. And don’t forget the closing costs as well. $170,000 is a lot of cash to be pulled out of someone’s portfolio and some buyers prefer to leverage as much as possible instead of tying up the down payment in the property. Real estate is not the most liquid of assets and the only time you can access that equity is with a higher-rate home equity loan or simply selling the property and subtracting the associated closing costs.
When financing a home with a down payment of less than 20 percent, buyers can employ what is called “piggyback” loan which is nothing more than a combination of two loans. The primary advantage to this option is the avoidance of mortgage insurance PMI. The first loan is at 80 percent of the sales price and the second loan at 10 percent. The buyers in this example then put down 10 percent.
Using the same example of an $850,000 purchase, the first mortgage would be at 80 percent of that amount, or $680,000 and a second home loan of $85,000. The interest rate on the second mortgage will be slightly higher than the rate on the first loan. Lenders commonly refer to this arrangement as an “80-10-10” loan.
There are also other jumbo loan programs where the buyers put down 10 percent with the first mortgage at 75 percent of the sales price and the second at 15 percent. The first mortgage would then be $637,500 and the second at $127,500. Some lenders offer slightly better rates on the first mortgage with this “75-15-10” scenario. Borrowers can pay extra on either the first or second loan. For example, once the second lien is paid off, only the first mortgage remains.
Another jumbo loan with a low down payment only asks for 5% down. Under this arrangement, the first mortgage remains at 80 percent of the sales price and the second a 15 percent with the remaining amount the down payment. Using the same example as above, the first mortgage would be at $680,000 and the second at 5 percent of the sales price, or just $42,500. Under the 80-15-5 financing option, the interest rates will be slightly higher compared to the 80-10-10 program.
Buyers will want to remember a few things regarding all the 90% and 95% Jumbo financing options listed above:
- 95% financing – loan amount limit is $2,000,000
- 90% financing – loan amount limit is $3,000,000
- Buyers will need to fully document all income and assets – this is not a “stated” income program
- The property must be a primary owner-occupied home or second home. There are other financing options for investment homes, however, these options will require a greater down payment
- Single family, townhomes, approved condos only. No vacant land, or build on your own land financing permitted.
Again, if you’re considering financing a jumbo purchase, if you don’t want to make a large down payment, you have some very attractive options. Buyers that have questions can reach us at Ph: 800-962-0677 or just submit the Quick Contact form on this page. Happy to serve buyers nationwide including NH: Manchester, Nashua, Concord, Dover, Rochester, Keene, Derry, Portsmouth, Laconia, Lebanon, Claremont, Somersworth, Londonderry, Durham, Berlin, Hampton