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Here in the Charleston, SC area we have some very expensive residential luxury real estate, and unless borrowers have the cash to pay for it, often times they need a jumbo loan. As with most coastal situated areas around the United States water front homes on Kiawah Island, Seabrook, Daniel Island Park, Sullivan's Island, Folly Beach and Mt Pleasant, and Downtown that regularly exceed $Million.

A jumbo mortgage loan is one where the amount borrowed is above conventional conforming loan limits. This standard is set by the two government-sponsored enterprises Fannie Mae and Freddie Mac, and sets the limit on the maximum value of any individual mortgage they will purchase from a lender or bank. Fannie Mae (FNMA) and Freddie Mac (FHLMC) are GSEs (government sponsored entities) that purchase the bulk of U.S. residential mortgages from banks and other lenders along with the FHA, allowing them to free up liquidity to lend more mortgages. When FNMA and FHLMC limits don't cover the full loan amount, the loan is referred to as a "jumbo mortgage" in which private investors are in the market place to provide these necessary funds. The average interest rates on jumbo mortgages are typically higher than for conforming mortgages due to the inherent risk the investors are taking on riskier backed assets / liabilities. As of 2010, the limit on a conforming loan in "general" areas was $417,000 and the limit in "high cost" areas (NY city, N. California, etc.) were $729,750 and $938,250, respectively. On October 1, 2011 the jumbo conforming limit of $729,750 in "high cost" areas was reduced to $625,500.

Jumbo mortgage loans are a higher risk for lenders. This is because if a jumbo mortgage loan defaults, it may be harder to sell a luxury residence quickly for full price because less of the population can afford pricier homes. Luxury prices are more vulnerable to market highs and lows in some cases. That is one reason lenders prefer to have a higher down payment from jumbo loan seekers. Jumbo home prices can be more subjective and not as easily sold to a mainstream borrower, thus it is common place that lenders may require two appraisals on a jumbo mortgage loan.

The interest rate charged on jumbo mortgage loans is generally higher than a conforming loan, due to the higher risk to the lender. It can be more expensive to refinance a jumbo loan due to the closing costs, because taxes, insurance and other related costs are so much greater. Some lenders will offer the service of an extension and consolidation agreement, so that a jumbo refinancer will not have to pay for mortgage tax again on the same principal balance. In other cases, title insurance companies will offer up to a 50% discount, often required by law for those refinancing within 1 year to 10 years. The largest discount is for refinancing within one year.

Some consumers seeking a jumbo mortgage choose to seek advice from a competent professional familiar with jumbo mortgage loans.

OPTION 2 -

Some investment brokers and/or large investment firms will lend money to their clients for jumbo luxury loans but secure it against liquid assets they manage for them. Often times these loan are lower in cost since there is collateral backing the loan to the borrower.

With a Purchase Loan, VA can help you purchase a home at a competitive interest rate, and if you have found it difficult to find other financing. VA's Cash-Out Refinance Loan is for homeowners who want to take cash out of your home equity to take care of concerns like paying off debt, funding school, or making home improvements. The Cash-Out Refinance Loan can also be used to refinance a non-VA loan into a VA loan. VA will guaranty loans up to 100% of the value of your home. Most VA Home Loans are handled entirely by private lenders and VA rarely gets involved in the loan approval process. VA "stands behind" the loan by guaranteeing a portion of it. If something goes wrong and you can't make the payments anymore, the lending institution can come to us to cover any losses they might incur. The VA loan guaranty is the "insurance" that we provide the lender. 
Read Guidelines For VA Loans

VA Home Loan Advantages

The guarantee VA provides to lenders allows them to provide you with more favorable terms, including:

• NO down payment 100% financing as long as the sales price doesn't exceed the appraised value.
• NO private mortgage insurance premium requirement.
• VA rules limit the amount you can be charged for closing costs.
• Closing costs may be paid by the seller.
• The lender can't charge you a penalty fee if you pay the loan off early.
• VA may be able to provide you some assistance if you run into difficulty making payments.

You should also know that:

You don't have to be a first-time homebuyer.

You can reuse the benefit.

VA-backed loans are assumable, as long as the person assuming the loan qualifies.

The days of many different types of loans has come and gone and there are about 2 or 3 different kinds of mortgage loan types that exist for the average person. The most common one now a days (which wasn't the case in the past) is the government loan by the FHA (Federal Housing Authority). FHA Loans in Charleston, SC or wherever in the U.S. are pretty much the same everywhere. What makes an FHA loan different than say a conventional or jumbo loan?

What is an FHA loan?

It's misleading; Federal Housing Administration loans are not loans at all, but a government agency that insures the loans so that lenders and/or banks can help lend money for home loans to people with:

• Have fair or poor credit
• Have a low down payment (must have at least 3.5%)
• Have undergone bankruptcy
• Have been foreclosed on in the past

So in essence, the federal government insures loans for FHA-approved lenders or banks so that lenders reduce their risk of loss if they lend to borrowers who might default on their mortgage obligations. The FHA program has been in place since the 1930s to help stimulate the housing market by making loans accessible and affordable. In the beginning, FHA loans were originally designed to help military families who return from war (then came VA), the elderly, handicapped, or lower-income families, but really, anyone can get an FHA loan - they are not just for first-time home buyers.

What does it take to qualify for an FHA loan?

Not really much more than a conventional loan. What you'd expect to have to have to qualify for any loan really.

• Credit score is between 500 and 579 (check Your credit HERE)
• Proof of regular, steady employment for at least 2 years
• Proof of adequate income
• At least 3.5% down payment
• At least 2 year of good rental or mortgage history
• Debt to income ratio of 43% or less
• Acceptable property and proper Appraisal
• 2 years out of bankruptcy and 3 years out of foreclosure

Since an FHA loan does not have as strict of standards of a conforming loan, it requires two kinds of mortgage insurance premiums: one is paid in full upfront OR, it can be financed into the mortgage -- and the other is a monthly payment. Also,

Are there any negatives to doing FHA loan vs. Conventional?

Having been in the mortgage industry once for over 13 years I know first hand that getting loans for condos isn’t as easy as it is for buying a single family detached property. Condos in Charleston SC are very popular because we are the #1 vacation city in the United States. There are a lot more factors that come into play with an attached home like condos & townhouses vs detached.

    Reason being, condos are usually less desirable and become even more less desirable if the community has other factors in play most of which concern the occupancy of primary residence vs renters. From a lenders standpoint a community becomes more risky to lend in if the majority of the condo development is comprised of tenants vs owners. Except in a vacation or second home scenario because then they know it’s common place and standard procedure and most owners have their units in a professional vacation rental program for investment purposes. Whereas a regular suburban condo development was never set up for that purpose. For instance: Fannie Mae Loans require – A project for which all of the following are true:

• at least 90% of the total units in the project have been conveyed to the unit purchasers;
• the project is 100% complete, including all units and common elements;
• the project is not subject to additional phasing or annexation; and
• control of the HOA has been turned over to the unit owners.

How does FHA Government Loans view condo lending?

FHA – Condominium mortgages are the best performing loans in their portfolio, accounting for only 5.79% delinquency vs 6.96% for detached single family. FHA Condominium Resource book states that prior to the change in FHA’s condo policy, the FHA’s market share of condos and single family moved closely together, even as the FHA receded from the market at the height of the bubble. Since the policy change, the two market shares have diverged steadily over time with the exception of 2013.

RULES: 

• The owner-occupancy requirement rate required was 50% (Current legislation has dropped to 35%)
• No more than 15% of units be more than 60 days due, excluding REOs. Dues for lender owned units are rarely received by associations in a timely fashion. Some state laws prohibit collection of delinquent assessments until 90 days past due, and many association governing documents do not consider owners to be delinquent until 60-90 days. (New law requests 90 days instead of 60)
• No more than 50% of units can be FHA insured already. (NAR requests new legislation increase it to 100%)

With the USDA loan program, no down payment is required and you are able to finance up to 102% of the property’s appraised value. With the elimination of the down payment assistance programs in late 2008, the USDA loan program is one of the only 100% loan programs available. However, there are income requirements, rules, and only certain communities, and areas are eligible for qualifying for a USDA loan. 

USDA Loans: No Upfront or Monthly Mortgage Insurance

With the USDA loan program, there is no upfront or monthly mortgage insurance required. With the FHA loan program, you have both up front mortgage insurance premium and monthly mortgage insurance as well.

With no mortgage insurance required, the USDA loan program can save you hundreds (possibly even thousands) of dollars each year that mortgage insurance would cost with a different type of loan. The USDA loan program is a great option for people who are looking to buy a house with little or no money down.

The only “bad” thing about the USDA loan program? The only thing that I can think of is that you will have to find a property that can qualify – and sometimes you may have to drive a ways to get there  as most homes that qualify will likely be very rural.

USDA Loans: No Credit Score Required

For the USDA loan program, officially, there is no credit score required… but unofficially, the minimum credit score that you will need to get approved by an investor is 620. This is relatively recent and may change back to the official answer — but for now, you need a 620 mid FICO score to qualify for the USDA loan program.

USDA Loans: No Loan Limit

The USDA loan program will allow you to finance “as much as you can afford”. There is no official loan limit with the USDA loan program, but the amount of money that you can borrow depends on your ability to repay the loan.

USDA Loans: Seller Concessions Are Allowed

With the USDA loan program, you can get the seller to pay as many of your closing costs as you can. There are no limits on “seller concessions” so negotiate the best deal that you can! Many loan programs limit the amount of seller concessions that you can have, but the USDA loan program doesn’t put a limit on them.

Lot Loans in Charleston, SC-

When looking to purchase a lot / vacant home site to build a new home be prepared that the mortgage loan terms are considerably different. The items needed for approval are the same, but usually you will need a minimum of 10% down BUT be prepared for 15-20%. Also, the loan terms are more stringent.

    The years you can finance vary from a 10-20 years, and the loan is probably going to have a balloon payment or adjustment at 5 to 10 years. Also, many lot loans require a build begin requirement within 2 to 5 years.

Charleston SC Construction Loans:

I am pretty certain these rules more than likely apply across the United States, but this is specifically detailed for those living in and around the Low-country of S.C. Construction loans are typically harder to get and slightly more expensive than a traditional purchase money mortgage because there is much more work involved while the property is being constructed. Usually the minimum for down payment is 10-15%. There is always an inherent risk to the bank that the builder miss-calculated the cost to build which adds another element of concern for the bank; thus increasing the cost of the loan. 

    As a rule of thumb it's a little easier to get an approval for a construction loan if you own the lot first. Most home builders in Charleston will want to know that you have your funds in order before beginning the project because they will have to apply for a draw to start phase 1.

    Banks in Charleston, South Carolina providing construction loans will want to see the plans of the home, the resume of the builder, and the build contract break down, among the other items related to your ability to qualify.