5 easy ways to get your hands on $1 million – Press Enterprise

Are you considering buying a mid-priced home?

If you don’t have a nice million in reserve, then you will need a mortgage. What does it look like exactly? And how do you qualify for the keys to your new kingdom?

Let’s talk about the down payment first.

You can enter with no down payment – assuming you are a fully eligible veteran or serving military member.

Otherwise, you’ll need at least a 3.5% down payment, or $35,000, for a Federal Housing Administration loan in Orange and Los Angeles counties. FHA loans are not an option for a $1 million home in the Inland Empire because the loan limit is under $562,350.

A conventional loan with 5% down payment, or $50,000, will get you there in Orange and Los Angeles counties. A ten percent down payment, or $100,000, can get you in anywhere.

If you are self-employed, you may be able to use an average of your business bank statement instead of your business tax returns to qualify.

More is always better. More skin in the game (larger down payments) means better mortgage rates and a lower house payment for you and yours. Home loans are risk-based.

show me the money

In my experience, more home buyers struggle to dig up the down payment than struggle to qualify for the income.

Savings, donating funds from a family member, selling investment funds on the stock market, or dipping into your retirement account are the most common ways to raise money.

Do you have cash value in your life insurance policy that you can leverage? Maybe you can contact your parents or grandparents for an early inheritance allowance. Or how about a prized classic car that you trade in for cash?

Down payment assistance programs and down payment grants are also available. But to my knowledge, these programs have loan size limits and/or maximum family income limits preventing you from qualifying in the $1 million bracket.

Always provide a clear paper trail for all large bank deposits, i.e. those larger than a paycheck, for example. Apart from donation funds and a donation letter, you will need to provide the last two months of asset statements (bank accounts, etc.).

5 ways to buy a million dollar home

Variable rate mortgages can initially be much more affordable.

With 10% down payment, or a loan amount of $900,000, I found a 30-year adjustment at 3.865% with a cost of three-quarters of a point. The rate is locked in for the first five years and adjusts annually for the remaining 25 years. The total monthly payment (including property taxes, home insurance and mortgage insurance) is $5,649.

A similarly priced 30-year fixed has a rate of 5.25%. The total payout would be $6,549. That’s an extra $900 to pay each month. A well-qualified borrower would need around $15,000 in monthly income.

With just 10% down payment, self-employed borrowers without eligible tax return earnings can cough up their last 12 business bank statements. Total deposits are averaged minus business overhead to determine your monthly income.

For example, let’s say the average deposits were $20,000 and the spend factor is 25%. Your income is equivalent to $15,000 per month. For a 30-year fixed rate at 6.5% and without mortgage insurance, the total payment is $6,930. With good credit, qualification is not an issue.

A fixed Fannie Mae with 5% down payment, or $50,000, is available at 5.375% with a cost of around three-quarters of a point. The total payment is $6,790 per month. You would need at least $15,100 per month of income to qualify.

FHA financing with only 3.5% less ($35,000) over 30 years set at 4.5% with a cost of about three-quarters point has a total payout of $7,054. You would need around $14,000 of income to qualify. The FHA allows for higher income-to-debt ratios, lower FICO credit scores, and non-occupant co-signers.

Another option is an interest-only loan. With 10% down payment, or $100,000, you can get an $800,000 loan that only has interest for the first five years at 4.125% with a cost of 0.625 points. The rate is revisable after five years. Then you can get a second top-up mortgage for the remaining $100,000 at an adjustable monthly rate of 4.24% fully amortized, which means the loan balance is reduced each month.

The total payment is only $4,482. But qualifying income is more difficult at around $17,000 per month.

All of these scenarios assume a property tax rate of 1.25%, or $1,041 per month, plus $200 per month of home insurance. They do not include HOA fees, if any.

Settlement fees and any required impoundment could add another $5,000 to $10,000 on top of the down payment and points.

According to Warren Hennagin, CPA Partner at Marcum LLP, one of the clear advantages of owning over renting is that you can deduct some, but not necessarily all, of your property taxes from your income taxes, as well. than all your interest payments for loans up to $750,000. .

Under the 2017 SALT tax cap, property tax deductions are limited to $10,000 per year. Assuming a property tax rate of 1.25%, a typical property tax bill for a million dollar home is around $12,492. Thus, $2,492 of this invoice will not be deductible.

Mortgage interest is currently 100% deductible up to a purchase loan amount of $750,000. Thus, only 83.3% of a loan of $900,000 would be deductible.

For unmarried co-owners of a residence, the mortgage debt limits apply to each taxpayer and not to the property. Thus, each taxpayer could deduct all interest paid on loans up to $750,000.

Freddie Mac rates the news: The 30-year fixed rate averaged 5.1%, down 1 basis point from last week. The 15-year fixed rate averaged 4.4%, up 2 basis points from last week.

The Mortgage Bankers Association reported an 8.3% drop in mortgage application volume from the previous week.

At the end of the line : Assuming a borrower gets the average 30-year fixed rate on a conforming loan of $647,200, last year’s payment was $792 less than this week’s payment of $3,514.

What I see: Locally, well-qualified borrowers can obtain the following fixed rate mortgages without points: A 30-year FHA at 4.625%, a 15-year conventional at 4.5%, a 30-year conventional at 5.125%, a -balance ($647,201 to $970,800) at 5.125%, a 30-year conventional high balance at 5.625%, and a 30-year jumbo purchase loan at 4.625%.

Eye-Catching Loan of the Week: A 30-year adjustable mortgage, locked in for the first seven years at 3.875% with 1 point.

Jeff Lazerson is a mortgage broker. He can be reached at 949-334-2424 or [email protected] His website is www.mortgagegrader.com.

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