Creative mortgages make comeback for credit-challenged borrowers


Euphoric was my state of mind after attending the California Association of Mortgage Professionals or CAMP sales and marketing convention earlier this week in Garden Grove.

Among the many things I learned was that previously discouraged, hopeless homebuyers blocked from buying due to niche credit challenges, lacking enough down payment funds or too little income now have hope of getting back on that road to homeownership.

For example, a previous foreclosure had a seven-year eligibility timeout for conventional financing and jumbo loans. Well, not anymore.

In as little as three years after most major credit events, you can put as little as 5 percent down and get a loan for up to a $1.5 million. A minimum middle credit score of 720 or higher is a must. That’s no PMI as well a 6.5 percent fixed interest rate. Oh my word!

Another program offers you an even shorter foreclosure time line. That is just two years out from most major events and 20 percent down, again with a minimum 720 FICO score.

How about putting just 5 percent down and getting very competitive pricing for a loan of up to $1 million? A minimum 680 credit score is required on this combo five-year adjustable rate first mortgage. The rate is 3.75 percent for up to 75 percent of the property’s purchase price, with a fixed second mortgage at 5.8 percent for the remaining 20 percent of the purchase price.

Go bank statements only and get a home. Get in with just 15 percent down, using the last 24 months of bank statement deposits (transfers don’t count) to calculate your income. That’s for a loan of up to a $1.5 million. A minimum 680 middle FICO score is required.

Federal Housing Administration loans are available for a loan of up to $636,150 with a 500 credit score. Pull cash-out up to 85 percent of your property value or buy with just 10 percent down.

Worried about mortgage rates moving up while you frantically try to find your dream home? Get pre-approved and get an advanced rate lock for 180 days before you go into escrow. Even better, if rates drop before you close escrow, you get a float down on your rate at closing.

Doctor, doctor? There's also a special loan for physicians that gives dispensation for student loans. Buy a home without getting hit for your student loans as long as your job starts within 60 days and the student loan payments are deferred for at least 12 months. Put at least 10 percent down and you can buy with a loan amount of up to $1.5 million. Nice!

Yes, we are certainly back to the creative credit box days where just about anyone can get qualified. Be careful if you are on that edge where higher priced creative financing gets you in. Have plenty of cash reserves. Make sure you don’t get so stressed out with the payment that you can’t sleep at night. Happy home hunting!

If you have questions or comments, please contact Jeff Lazerson by clicking here.

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Jeff Lazerson - Mortgage Columnist since 2011