If you’re applying for a loan, be sure to get ready to scan/PDF and/or ask for a lot of the following information for your would-be lender. Be sure to keep copies as it’s likely that you’ll be asked for the same docs many times and start early. There will be tons of questions, clarifications and digging for docs that can add a lot of time to the pre-approval and approval process, which may lead to unnecessary delay in getting your financing ready that will lead to a weaker offer. Best practice is to get ‘super approved’ (i.e., fully underwritten) first and after we get your next property into escrow all that will be left is to confirm your creditworthiness and the property’s condition and contract price (by appraisal)
Starting the Financing Process
While there’s more to come for sure, we wanted to give you the first steps in tacking the home mortgage application process which will most likely be the most annoying part of the entire home buying process.
Yes, San Francisco and the Bay Area are expensive places to buy property. Good thing that there are lots of ways to buy a home. While cash is king, all-cash offers aren’t always the offers that win. We explore some of the potential options for financing your purchase, but here is the documentation that most lenders will want to review. Remember your circumstances will be different so be aware of that.
HUNT+GATHER
A lender will only speak in generalities until they see your paperwork as they need documentation, documentation and more documentation. So you should start by gathering these materials and you should keep the originals and PDF them as you’ll have to send these materials in at least a few times.
Last 2 years of W–2s &1040s for self–employed and/or tax returns (personal & business returns
FILED (e.g., 1120, Sched. K–1) Last 2 pay stubs & employer verification/ability to do so easily; year-end pay statements, 2 years
Last 2 months bank statements (checking, savings, IRA, Money Market, etc)
Credit report fee (banks pull their own), you could provide your own to avoid multiple inquiries but they'll eventually get their own
Photo I.D. (Driver’s License, Passport, Green Card, etc.) (VA letter/certification)
Landlord contact information 12 months proof of rent payments; i.e., canceled checks, statements, etc.
If you’re getting RSUs, vesting schedule showing award amounts and payouts
Gift Letter from relatives/investors; don’t forget they can ‘loan’ you money through forgivable loans
All cash? Funds verification/bank statement
Changing jobs? Offer letter from new employer (potentially, 1 pay stub from pay cycle of new employer)
For current homeowners: current mortgage statement/sales contract
Various HUD & lender application materials
Whatever underwriting requests Explanatory letter for any special cases or situations
If you have any questions about documents or special circumstances it’s best to CALL your lender rep versus emailing them.
What Questions Can We Answer?
There’s a lot to digest here we know. Feel free to ping us if you have someting you'd like to ask us.
Factors to Judge Lenders By
Most of the time a lender is judging you and your finances, but remember you are the consumer. So here’s the time where you can judge them. There are two areas we focus on: can the lender help us get our offer accepted and can you live with the terms of the mortgage you get.
As your agents, we will be concerned with how fast a lender can close the purchase which is how fast they can get an appraiser to a property (which became a real issue since the Pandemic started), how fast and how deep their underwriting will go and and if the lender really knows San Francisco’s market well because our numbers are higher and the circumstances are unique unto ourselves because listing agents will take notice of these things.
As a borrower, here are some of the things you should look out for:
- Are there origination points (i.e., lender fees to even do the loan)?
- What (and how much) are post-close reserve requirements and what can be counted as such? (i.e., if you lost your job, how many many months of the mortgage can you pay from your assets that isn’t already part of your cash down payment; stock options, RSUs and retirement funds may not be credited 100 percent either)
- Early prepayment penalties, if any (that make refinancing or early sales less advantageous)
- Number of appraisals required for your purchase, even if it’s not a contingency (if each appraisal costs close to $1,000 . . .)
- Underwriting duration, as in how long it will take for them to close the purchase from when the offer is accepted to when we have keys
- Reputation and ethics
- How vigorous are their underwriters? (and how forgiving they are)
- Down payment requirements (10, 15, 20, 25, 30, 40 percent?)
- How often credit is pulled (and how long a pre-approval lasts)
- If you can be ’super’ qualified before we make an offer (i.e., can you be fully underwritten before we make an offer and how long that takes)
- If a lender is willing to have a second mortgage follow their first mortgage
THE LOAN TYPES
We’ve seen them all and worked with them all too, but you may not have so let’s examine them, shall we?
Jumbo the Loan
The Most Likely Loan You’ll Get...
This is what most people tend to get in San Francisco, so let’s start with it.
Jumbo Loans (20+ Percent down)(or in excess of the conforming loan limit)
Terms will vary by lender but this is the class of loan that you’ll likely use in high-priced San Francisco; some can be 30-year fixed, others can be 3-, 5-, 7-, 10-, or 15-year Adjustable Rate Mortgages (ARMs) whereby mortgage rates are locked for a shortened period of time as opposed to the standard 30 years. Most times loan limits will be somewhere in the $2-$3 million range with loans being approved in 10-20 days with similar documentation requirements that conforming loan lenders will apply but when issuing jumbo mortgages, lenders tend to be more lenient than Freddie and Fannie guidelines. Jumbo lenders are the ones who set the underwriting guidelines after all as they decide how they’ll hold your loan or package it as a security. Most jumbo mortgage rates tend to be 1/8th point higher than conforming conventional loans but the underwriting terms worth it.
Insofar as it is collaborative, a society can enable its members to benefit in ways that would not otherwise be possible on an individual basis; both individual and social (common) benefits can thus be distinguished, or in many cases found to overlap. A society can also consist of like-minded people governed by their own norms and values within a dominant, larger society. This is sometimes referred to as a subculture, a term used extensively within criminology.
The Conventional
Maybe this type will work.
Usually a non-starter in SF, recent changes make them viable here now.
Conforming loans are ones that comport with Freddie and Fannie loan guidelines (maximum loan amounts)
San Francisco, being one of the most expensive markets in the country, has a conforming loan limits well above those in the rest of the country. For 2022, the FHA conforming loan limit is $970,800 for condos and houses; $1,243,050 for 2-unit buildings; $1,502,475 for 3-unit buildings; and, $1,867,275 for 4-unit buildings.
Typically, these are fixed rate, 30–year (or 15) with no pre–payment penalties and a minimum of a 20 percent down payment. Borrower’s debt–to–income ratio requirements vary and may be more lenient than the maximum 45 percent of your monthly gross income can be spent on the mortgage payment. Sometimes the lending guidelines for conforming conventional loans are more stringent than Jumbo loans. Credit score expected: 740.
The power of the conforming conventional loan is that there are times where the exceptions that can be made for X, Y or Z, things like property condition, income questions, credit history, may be more wide encompassing than their jumbo loan brethren. The lending guidelines are hundreds of pages long with charts and tables and questions, so it definitely requires professional help to wade through it all. Check out FannieMae’s site here for updated limits and explore some too while you’re at it to learn more.
FHA loans in . . . San Francisco?
Available all over the country (but with lower purchase price limits), various mortgage programs that government-backed may not be viable here in the Bay Area given our prices.
The main draw is that cash down payments can be as low as 3 or 3.5 percent of the purchase price with most of your closing costs and fees being folded in the with the 30-year fixed rate mortgage. DTI ratios are more generous (up to 51% in some cases) and, with 2022 loan limits for high market areas like San Francisco being raised to all-time highs, seem like viable way of getting into real estate. (Current 2022 loan limits range from $970,800–$1,867,275 for 1 to 4 units).
BUT here’s the rub: mortgage insurance. Some programs like the HomeReady loans allow you to remove the monthly cost when you reach 20% equity in the property, while other FHA variants may not. Check with your lender.
And one more thing: if you want to buy a condo (which is the only property type with any hope of being within high-value market ranges, the building (HOA) must be FHA-approved, which is a long process that many developers and HOA choose to skip. Most buildings in San Francisco are not FHA-approved because FHA-loan limits were simply too low historically to make the effort of getting approved worthwhile. With new loan limits though, this may change some with higher borrowing limits but FHA-approved buildings still remain the exception. Credit score expected: 720.
SPECIAL LOANS: The 80:10:10
Usually, supplemental mortgage insurance (MI) is required for borrowers who put down less than 20 percent toward a property’s purchase price for buyers getting a single mortgage loan.
But for well-qualified or otherwise-qualified buyers (e.g., incentive programs from the Mayor’s Office of Housing) it may be possible for a buyer to do a 10 percent cash down payment with a second 10 percent mortgage (a second or junior loan) to the main 80 percent mortgage (the first or primary) without having to pay any mortgage insurance.
The second loan may be akin to a home equity line of credit on the property being purchased that, through the power of compounding interest, may have a higher interest rate or extra upfront points that need to be paid at closing.. Some of the costs from a second may not be tax deductible. Strong credit (mid-700s) required.
SPECIAL LOANS: HARD MONEY
As the name implies, these loans are not loans from the usual suspects (or, if they are, these are the most aggressive loans they will have in their battery of lending products). These may be locally held portfolio loans. These are the most flexible, short-term but expensive loans to get (relatively speaking, they can be 2x the going rate or more). Usually required for unique situations where property is not otherwise lendable (construction, fire, foreclosure, under litigation) — in other words, when cash isn’t an option.
SPECIAL LOANS: CENSUS TRACT (3–10 percent down)
There are certain loans available for specially-designated qualifying Census tracts. The designations are based on U.S. Census median income data which will highlight areas that need a boost of homeowners. Lenders are either required to carry mortgages in these areas or obliged to by the powers that be.
Requirements for borrowers may vary with income caps or otherwise, and not at all lenders will have these types of programs either. And qualifying tracts will and can change over time. The main benefit is that these loans will allow buyers to put as little as 3–5 percent down to purchase a property without having to pay for mortgage insurance either.
For more, take a read here.
SPEICAL LOANS: BRIDGE LOANS + DEPARTING RESIDENCE LOANS
Type of loan that allows you to buy your next home while you still live in your current one with the expectation that you sell the current house once you close on the new one; usually 12-18-month time window. You may even finance your destination home’s down payment. Compare with other programs like a departing residence loan whereby you have your second home’s down payment already. Rates and limits vary by circumstances.
The Conventional
Maybe this type will work.
Usually a non-starter in SF, recent changes make them viable here now.
Conforming loans are ones that comport with Freddie and Fannie loan guidelines (maximum loan amounts)
San Francisco, being one of the most expensive markets in the country, has a conforming loan limits well above those in the rest of the country. For 2022, the FHA conforming loan limit is $970,800 for condos and houses; $1,243,050 for 2-unit buildings; $1,502,475 for 3-unit buildings; and, $1,867,275 for 4-unit buildings.
Typically, these are fixed rate, 30–year (or 15) with no pre–payment penalties and a minimum of a 20 percent down payment. Borrower’s debt–to–income ratio requirements vary and may be more lenient than the maximum 45 percent of your monthly gross income can be spent on the mortgage payment. Sometimes the lending guidelines for conforming conventional loans are more stringent than Jumbo loans. Credit score expected: 740.
The power of the conforming conventional loan is that there are times where the exceptions that can be made for X, Y or Z, things like property condition, income questions, credit history, may be more wide encompassing than their jumbo loan brethren. The lending guidelines are hundreds of pages long with charts and tables and questions, so it definitely requires professional help to wade through it all. Check out FannieMae’s site here for updated limits and explore some too while you’re at it to learn more.
Insofar as it is collaborative, a society can enable its members to benefit in ways that would not otherwise be possible on an individual basis; both individual and social (common) benefits can thus be distinguished, or in many cases found to overlap. A society can also consist of like-minded people governed by their own norms and values within a dominant, larger society. This is sometimes referred to as a subculture, a term used extensively within criminology.
FOLKS WHO CAN HELP
We’ve worked with a lot of folks who have helped our clients get their homes. Reach out to them to see if they’d be a match for you.
Conventional Purchases, Houses, Condos, Multi-Unit
Tony Alencar
Citibank
Home Lending Officer
(415) 215-1239
[email protected]
NMLS # 484714
Bridge, Portfolio, Unconventional
Patrick D Skovran
Boston Private
NMLSR #453408
SVP Market Leader – Residential Lending
415.806.8980 cell
415.402.3140 office
[email protected]
Conventional Purchases
Sean Patrick Farrell
Wells Fargo
Home Mortgage Consultant
Residential Lending
NMLSR ID 507300
Wells Fargo Home Mortgage | 555 12th St., Suite # 2140 | Oakland, CA 94607
MAC A0240-212
Cell 510-220-6859 | e-fax 866-720-7654
[email protected]
Mortgage Broker/Portfolio
Peter Barnes
RPM Mortgage
NMLS # 239580
1385 Shattuck Avenue unit B
Berkeley, CA 94709
Office # 510.647.5326
Cell # 415.302.3398
[email protected]
Construction, Purchase and Renovation, Development, Mortgage Broker
Connie Buchanan
Stephanie Hoff
California Real Estate Loans
NMLS #241170 & DRE #01200004
APMC dba California Real Estate Loans, Inc.
600 N San Mateo Dr, San Mateo, CA 94401
Cell: 415-999-2172
Tel: 650-342-4466
Fax: 650-342-9504
[email protected]
Unconventional, Investment, Remodel
Leman J Woo
Loan Depot
NMLS # 916227
Senior Loan Consultant
700 Airport Boulevard Suite 280
Burlingame, CA 94010
(650) 993-7580 office
(415) 812-2934 cell
[email protected]
General Information Only.
Remember that the advice above is just for information only and that your situation, circumstances are unique to you and that you should consult a financial professional before proceeding with any application for credit. Things in the financial sector can and do change with little or no notice, so keep current. Also, referrals above are to lending professionals we’ve worked with previously but that we receive no consideration, rebate or otherwise from the folks listed above. You must make the right choice for you exercising your own judgment and assessment.