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Vikki Nguyen

Niche Jumbo Program that allowed up to $979,250 loan amount

Thursday, May 5, 2011 - Article by: Vikki Nguyen - H3 Lending Group - Message

Albert Bui Blog Article that Might be Relevant to you
The difference between a Mortgage Planner and Loan Officer

So recently Albert Bui was asked during a meeting with an agent how he can help them generate more business besides giving me referrals which all of lenders love of course....

This was definitely a heavily loaded question because there are so many answers but realizing the part of the market that the particular agent was in I was quick to realize a particularly important example.

The agent happened to be in a jumbo segment of the market. Now realizing that most of the big banks like Chase, Citi, B of A, Wells, and Union only offer jumbo loans above the Fannie/Freddie super conforming limit of 729,750 at 25-30% down payment.

Albert realized he had access to a Niche Jumbo Program that allowed up to $979,250 loan amount at 10% down.

In the example the home was offered at a sales price of $1,075,000. Instead of putting down 25% which is $268,750.00 we are able to come in with 10% or $ 107,500 to purchase this home with very manageable PMI the cost of the difference in down payment savings was $161,250 and at 6.5% rate that would have been tied up in the equity of the home subject to the market's whim.

With this extra money available we could either make the financial planner very happy by parking it into a IRA fund, annuity or etc or better yet create a real estate related strategy that a realtor would be happy with.

So Albert proposed taking the money putting $150,000 (25% down) on a 600,000 4 plex that at the end of the day after accounting for all operating costs would yield a return of 11.37%. Where else can you invest semi-passively (mgmt company) and get a 11.37% return?


At the end of the day, it's an extra sale for the 1)Real Estate Professional (proposed primary residence in addition to 4-plex investment property), the 2)Financial planner is happy he has the extra cash flow from the units to work within his or her wealth management strategy, 3)Mortgage Planner is content he/she have two loans and have effectively utilized the funds of the client in an efficient manner, and 4)CPA - Tax professional - is able to build more business through tax work the additional returns that will be filed (investment property through a multi member LLC partnership return), and 5) Client achieves the home they wanted and gained a net positive return of 11.37% with minimal risk instead of sinking it into the property at an opportunity cost of 6.5% (money being tied up - no liquidity).

*rates of return, opportunity cost, and rate cost: are before tax for simplicity. Your specific tax situation may vary depending on the brackets you or your client may be in and should consult a qualified tax professional for additional consultation.

*Investment property: utilizes a 5.125% 30 Year fixed loan with payment of $2450.19 on loan amount of $450,000. The operating costs includes: interest expense, property tax, insurance, pad for repairs, mgmt fees, tax preparation fees for entities, non cash depreciation, and component depreciation on a straight line basis.

*Note: while the 1st loan on the proposed home that is a jumbo is higher due in part to a higher loan amount and PMI this added cost is offset by much high return from the investment property plus the use of a 30 year fixed loan which pays down equity on the investment property. This equity pay down is not calculated in the return, if it were the return would be upwards of 15.7%. The return calculated is the before tax cash that flows to the client on a operating basis.

*** Awesome theory and concepts*** Call now 800-552-8670 ext 124

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