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YES ! Just give him the best advice you can . And that should be "LOOKS like this is more house then you should be trying to get in to" > So just sit tight and wait untill you find something you really can afford ! Just look around at the many people that ttried the same thing only to wind up loosing the property. also he may qualify for the loan but it sounds like it's still more then he can manage?
No, that's not the case at all. You don't know what you're talking about...but that's okay. He doesn't need much advice. He's well educated, spent years with a bulge bracket investment bank on Wall Street, received a law degree from an Ivy League law school, handled multi-billion dollar mergers and acquisitions and multi-billion dollar bankruptcies, and has dealt first-hand with the Federal Reserve Chairman on the recent Wall Street investment banking and financial meltdown. I think he knows what he's doing... The house is well within his means. He has no debt, a credit score of 800 and a combined family income approaching 7 figures. Plus, he has me to back him up with enough assets to buy all the houses on the entire block. Not everyone is as obtuse as you might think...
No, that's not the case at all. You don't know what you're talking about...but that's okay. The house is well within his means. He has no debt, a credit score of 800 and a combined family income approaching $500k. Plus, he has me to back him up with enough assets to buy all the houses on the entire block. Not everyone is as obtuse as you might think...
I'm in the same situation as your son. Same income tax bracket. I assume your son is in his late 20's/early 30's Probably has around 150-200K cash sitting around, plus investment/retirement account that he does not want ot cash out.
I'm trying to buy a home in the 600-650k range down in FL. This will be my primary home in addition to my other house in Maryland.
The problem is there are very few companies willing to underwrite jumbo loans (according to my mortgage broker).
I can afford the mortgage but the problem is that the jumbo loans are 2 percentage points higher than a conforming loan down in the Orlando area. Each point on a lets say 500K mortgage means paying about 500 dollars extra a month just in interest so paying 2 percentage points higher on a jumbo loan equals about 1000 extra a month just in interest payments.
So for a 650K house, just to get down to the 417K conforming loan in order to get around a 5 percent rate, my mortgage broker says I have to come up with around 235K in cash and that's excluding closing cost. Basically I would have to put down over 35 percent downpayment. That's insane. I know where you are coming from.
I do not think the banks will be willing let you use one of your 250K properties as collateral for your son. They would be more than willing to extend you a home equity loan for that amount. They want to make money and they want you to take the risk too. Banks want customers to share in the risk these days.
If I were you, I would take the home equity loan (the loans are very cheap these days) BOA was offering me 4% home equity loan on my other house. You know the government isn't raising interest rates anytime soon. If you son is making the same kind of money as I am, he should be able to save 100-130K cash each year (if he lives within his means) and he should be able to repay you that 250K within 2 years. That's what I would do if I were you and your son in terms of getting to that magical 417K loan limit.
With me, I'll either have to borrow from one of my older brothers or sisters 30-40K or wait until April of this year in order to make that similiar huge downpayment.
I would think that most banks would want him as a long-term banking customer.
Bank of America doesn't care that much anymore. I'm a Premier BOA with both individual and business accounts. Plus over 500K in investments with BOA and an existing mortgage.
I threaten to pull my money over to Vanguard where I'm a Vanguard Voyager Select member (Vanguard treats their premium customers much better). All BOA would do is lower my jumbo rate from 7.75% down to 7.25% with zero points in Florida. My mortgage broker could get me 4.9% conforming and 6.9% jumbo both with zero points. This was a few weeks ago so the interest rates are probably a little different now.
Point is BOA/Wells/Chase really do not give a crap about their premier customers. Maybe if I had over 5 million with them, they would have lowered their rate.
Point is customers like us (high income, low/no debt recession proof job, young, healthy) present almost zero risk to banks in terms of jumbo loans but we are getting burned by higher interests because they are grouping us with everyone else.
I'm in the same situation as your son. Same income tax bracket. I assume your son is in his late 20's/early 30's Probably has around 150-200K cash sitting around, plus investment/retirement account that he does not want ot cash out.
I'm trying to buy a home in the 600-650k range down in FL. This will be my primary home in addition to my other house in Maryland.
The problem is there are very few companies willing to underwrite jumbo loans (according to my mortgage broker).
I can afford the mortgage but the problem is that the jumbo loans are 2 percentage points higher than a conforming loan down in the Orlando area. Each point on a lets say 500K mortgage means paying about 500 dollars extra a month just in interest so paying 2 percentage points higher on a jumbo loan equals about 1000 extra a month just in interest payments.
So for a 650K house, just to get down to the 417K conforming loan in order to get around a 5 percent rate, my mortgage broker says I have to come up with around 235K in cash and that's excluding closing cost. Basically I would have to put down over 35 percent downpayment. That's insane. I know where you are coming from.
I do not think the banks will be willing let you use one of your 250K properties as collateral for your son. They would be more than willing to extend you a home equity loan for that amount. They want to make money and they want you to take the risk too. Banks want customers to share in the risk these days.
If I were you, I would take the home equity loan (the loans are very cheap these days) BOA was offering me 4% home equity loan on my other house. You know the government isn't raising interest rates anytime soon. If you son is making the same kind of money as I am, he should be able to save 100-130K cash each year (if he lives within his means) and he should be able to repay you that 250K within 2 years. That's what I would do if I were you and your son in terms of getting to that magical 417K loan limit.
With me, I'll either have to borrow from one of my older brothers or sisters 30-40K or wait until April of this year in order to make that similiar huge downpayment.
You pretty much nailed it...
I think he'll likely go ahead with the jumbo loan and pay it down really quickly to under $417k so he can refinance it hopefully at a [still] low rate.
I'm not familiar with what is going on in Florida, but in many parts of the U.S. jumbo loans are definitely available for qualified people with excellent credit at reasonable rates, e.g. 6.375 with a point or less. Since my son is an attorney he is able to take advantage of being able to obtain a special mortgage (for attorneys, doctors and CPAs) with no PMI, one point or less and zero down payment, the latter not being necessary in his case.
I suggest you try a regional bank that keeps all their home loans and make sure they know what a valuable long-term customer you would be...because in all likelihood whatever bank you deal with for your home loan will be the bank that handles your other financial needs.
I'm glad you posted - it just shows that not all people seeking large loans are without the resources to easily handle the debt. As you noted, it doesn't take long to build up a nice amount of cash with a healthy income.
Bank of America doesn't care that much anymore. I'm a Premier BOA with both individual and business accounts. Plus over 500K in investments with BOA and an existing mortgage.
I threaten to pull my money over to Vanguard where I'm a Vanguard Voyager Select member (Vanguard treats their premium customers much better). All BOA would do is lower my jumbo rate from 7.75% down to 7.25% with zero points in Florida. My mortgage broker could get me 4.9% conforming and 6.9% jumbo both with zero points. This was a few weeks ago so the interest rates are probably a little different now.
Point is BOA/Wells/Chase really do not give a crap about their premier customers. Maybe if I had over 5 million with them, they would have lowered their rate.
Point is customers like us (high income, low/no debt recession proof job, young, healthy) present almost zero risk to banks in terms of jumbo loans but we are getting burned by higher interests because they are grouping us with everyone else.
I suggest you try a more regional bank that keeps all their home loans themselves and make sure they know what a valuable long-term customer you would be. I'd also suggest talking with the very highest ranking person possible. A small bank's CEO definitely wants you as a customer! The only problem is they may not be able to offer you all the services you need.
I think he'll likely go ahead with the jumbo loan and pay it down really quickly to under $417k so he can refinance it hopefully at a [still] low rate.
I'm not familiar with what is going on in Florida, but in many parts of the U.S. jumbo loans are definitely available for qualified people with excellent credit at reasonable rates, e.g. 6.375 with a point or less.
I'm glad you posted - it just shows that not all people seeking large loans are without the resources to easily handle the debt. As you noted, it doesn't take long to build up a nice amount of cash with a healthy income.
Good luck to you!
Your son is in my situation. I can emphasize with him. Lots of people make general assumptions that since you are young and make a healthy income, you will not be responsible with your money. People just do not feel sorry for us (not that I expect any sympathy).
In terms of finding a good regional bank, each bank I've been at has been brought out my larger banks (Riggs Bank (PNC acquired it in distress situation) in DC area and Chevy Chase (purchased by Capital One) I know I get better service at those banks than the super banks but they keep on getting brought over. Same thing with my Wachovia account. Wachovia was a nice people friendly bank and than First Union brought them over (took over the Wachovia name) and you know the rest of Wachovia recent history.
FL is a very tricky market in terms of jumbo mortgages. I'm currently month to month on my apartment lease. I still have my house back in suburban DC (on Maryland side) and there I can still get a conforming mortgage in the high 500's low 600s range because its a higher cost area. In Orlando, it's considered a "declining market according to my broker," although it's the market is no where are bad as the South Florida market.
I agree-- these large mega-corporations assert that they want to attract and retain A-paper customers, but they don't lend accordingly. You'd think an 800+ FICO, significant assets and a solid income/earning potential would net you their most favorable terms or at least personal service, but that's just not the case. I'm going through a refi with WF and they're sticking me with a higher rate and less favorable terms than a troubled borrower looking at default. When I asked for the same deal they were giving someone I know is behind on their payments, they refused.
The people getting the best deals these days are those least qualified for them; if you can pay, banks look to you to subsidize their losses. I'd recommend a small, hometown bank or a portfolio lender, but they aren't lending much. Reputable regionals like Riggs or Chevy Chase (I banked at both when I lived in DC) cared about their customers, but they've been gobbled up by impersonal giants. Good luck to you!
The people getting the best deals these days are those least qualified for them; if you can pay, banks look to you to subsidize their losses.
Sounds like the American way to do business. Prime example is the biggest legal ponzi scheme of them all (our social security system) where young worker bees like us will never see any benefits. Government in the end will just say that I am withdrawing too much of my own money from my retirement account and they will not cut me a social security check that I've been paying.
No, that's not the case at all. You don't know what you're talking about...but that's okay. He doesn't need much advice. He's well educated, spent years with a bulge bracket investment bank on Wall Street, received a law degree from an Ivy League law school, handled multi-billion dollar mergers and acquisitions and multi-billion dollar bankruptcies, and has dealt first-hand with the Federal Reserve Chairman on the recent Wall Street investment banking and financial meltdown. I think he knows what he's doing... The house is well within his means. He has no debt, a credit score of 800 and a combined family income approaching 7 figures. Plus, he has me to back him up with enough assets to buy all the houses on the entire block. Not everyone is as obtuse as you might think...
Sorry but i do! , just like the little guy . You can't have your cake and eat it too. If he wants the $650,000. home and the banks don't want to deal then he will have to pay their price . Or buy some thing less expensive . just because he makes 7 figure wages dosen't mean he needs that house.
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