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Ask a Lender: Mike Nielsen, Guaranteed Rate

by Chicago Agent

Q: Do All Jumbo Loans Require a 20 Percent Down Payment?

A: This is a great question that I hear from agents and buyers all the time.  Both are usually shocked (yet excited) to hear YES, there are jumbo loan options up to 90 percent loan-to-value for condos and single-family homes. As you can likely assume, all guidelines for jumbo financing are very lender-specific, so, as always, make sure you are dealing with a reputable and trusted lender. Jumbo loans are not sold to Fannie Mae or Freddie Mac, so the loan officer will need to know the requirements of the buyer or borrower, which can be intricate. Borrowers will likely be expected to have superior strength in the areas of credit score, debt-to-income ratio and asset reserves. When financing condos with higher loan-to-value jumbo products, agents will also want to make sure the condo building is considered warrantable by the lender.

Q: What are some of the requirements for warranting a condo for conventional and jumbo financing?  

A: It is best to tackle condo warranting by starting with a few general questions.  First, is the condo building new or existing construction? The answer to this question will help you answer the second and most important question of whether you will need a full or limited condo review. New construction will require a full condo review if the property is still under construction, if less than 90 percent of the units are sold or conveyed, if the developer is in control of the homeowner’s association, or if the building is subject to additional phases. If none of these are true, a limited review will be allowed. A full condo review is exactly that – a full condo review; underwriting will want to review all condo documents and get a full picture of the association. Documents required will be recorded declaration and bylaws, insurance certificate, budget, architect and engineer report, and full condo questionnaire. The condo questionnaire will ask detailed questions about the association such as litigation, occupancy, and asset reserves, to name a few. Other items that will trigger full review are owner-occupied units greater than 90 percent loan-to-value, second home occupancy greater than 75 percent loan-to-value and all investment properties.

A limited condo review is more of a quick snapshot of the condo association and less detailed. Documents required are only the insurance certificate, budget (only if the property is over 20 units), and a limited condo questionnaire. Jumbo lenders may have some changes or additions to these condo guides, but for the most part, they will follow the qualifications listed above.

While at Guaranteed Rate, Mike Nielsen has consistently closed 125-plus loans annually, averaging over $35 million in yearly production. Nielsen is a top-producing loan officer, securely within the top 1 percent in the country and has been a president’s club member for 2008, 2009, 2010 and 2011. He and his team specialize in jumbo products, first time buyers, FHA and CPS grant programs. 

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