Remember when it was possible to finance a $2mm home with only 10% down payment? Of course, that was 2007 and mortgage lending guidelines were so loose that they eventually led to the Great Recession. That written, it is possible today to purchase a $1,760,000 home with only 15% down, and the seller is NOT required to participate in the financing! Let’s break it down for better illustration:
- Purchase price of $1,760,000
- First mortgage of $1,232,000 (70% loan-to-value)
- Second mortgage of $264,000 (15% loan-to-value)
- Down payment of $264,000 (15% loan-to-value)
Add up the total amount of leverage/mortgages available in this scenario, and that’s $1,496,000 in total leverage!
You may be asking how this is possible when the Great Recession was blamed on lending guidelines being too loose. The answer is that the risk of high leverage can be offset by sticking with sound fundamentals of mortgage lending, which include good credit, stable employment, reasonable debt-to-income rations, solid reserves and a stable real estate market.
For a one-page illustration of the program above, please visit http://online.wsj.com/article/SB10001424127887323798104578454853809083688.html#mod=todays_us_marketplace