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Asked by M, San Francisco, CA Thu Feb 26, 2009

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, ,
Fri Feb 27, 2009
You've received excellent advice so far on this topic:

1. Use seller secondary financing
2. Continue to save
3. Lower your price range ($810k would work with 10% down, PMI and a mortgage of $729,950)

I would also like to add a few other ideas:

1. Find a family member who will lend you the 10% additional that you need -- there are ways to structure this so it's acceptable to a lender
2. Look into obtaining a 401(k) loan through your current employer -- it sounds like you would be in a position to pay it back in a year or two, which is good. Also, did you know you can take out up to $14,000 from an IRA with no penalty if it's to buy your first home. If you each have an IRA (not 401K), that's $28,000 right there.
3. Find an "angel" who might be willing to lend you the 10% additional that you need, who would share in the equity appreciation that you will eventually have (friend, colleague, employer)

We used to call these techinques creative financing -- until that got a bad name by people being "too creative"!
Web Reference:
1 vote
James Testa, Agent, San Francisco, CA
Mon Mar 9, 2009
Hi M,

I hope this gives you hope: I am working with several clients at the present who have been able to get a loan with 10% down!

The lending environment is very dynamic and things are changing rapidly. A good rule of thumb is to shop the mortgage by going to the funding source, i.e. the direct lender. With that said, you may also find that a mortgage banker may be able to offer you products that the retail giants will not.

FYI - a mortgage banker is a hybrid between a traditional bank and a mortgage broker. He or she has a direct source of money and they are also able to shop the wholesale market for you.

I am happy to pass along the contact information for the gentleman who has done great work for me. Please feel free to contact me and I will pass along his information.

Warm regards,


James Testa
Paragon Real Estate Group
0 votes
Danielle Laz…, Agent, San Francisco, CA
Fri Mar 6, 2009
Hey M,

The banks were doing everything they could to give you a loan not so long ago and now, they are doing everything they can NOT to give you a loan.

Listen, I have buyers who bought a home with 10% down within the past 6 months but now, I am not so sure they could.

I'm working on an update to this question on my blog b/c so many of my clients are affluent & professional first time buyers like you and they want to know the options.

Right now, it looks like you gotta put 20% down...minimum.

The good news is that condo and home prices are down. Maybe you can afford 20% down on a home you'd like b/c of the price declines?

If it turns out that you'll have to do 20% down and you won't have that much saved until early next year, that's OK. I think we'll still have some good values to go around... And, I totally agree that you should not touch your retirement savings given your financials.

So, right now, yes, 10% down payments may be a thing of the past. Hopefully, not forever but for now... Qualified home buyers in high-cost areas like SF should be able to buy with 10% down payment...and I believe one day they will again.

Best of luck and let us know if we can help further.
-Danielle Lazier San Francisco Realtor
Zephyr Real Estate
415.731.5000 x158
danielle (at)
Web Reference:
0 votes
Paula Deliso, , San Francisco, CA
Thu Mar 5, 2009
Hi M,

A mortgage broker I know recently made me aware of a loan program with very competitive interest rates on a 5/1 ARM with as little as 11% down. This loan product requires that you have reserves, and the reserves can be in a 401K or other retirement account. The maximum loan amount for this program is $1.875M. For more information about this loan, contact Ben Miller at 415-577-2265 or

Best of luck to you.
0 votes
The Binnings…, , San Francisco, CA
Fri Feb 27, 2009
Hi M,

The other agents are correct that 20% down in the $1M range is requisite. However, there may be a way around it, since you and your husband are qualified.

Many sellers are willing to do a "carry-back". What is a carry-back? It's basically a 2nd mortgage where the seller augments your 10% down payment with 10% of their own.

Let's say you buy a $1M property. You put down $100,000 of your own money as a down payment and the seller loans you $100,000 on terms that you all agree to. There's your 20%. The bank gives you the remainder 80% and you're in.

Seller carry-backs are common, especially during time periods where qualified buyers such as yourself have trouble getting into a home they can clearly afford. In the 1980's, interest rates were so high that it was virtually impossible for buyers to get in, so seller carry-backs were the norm.

The other alternative is to do as Jed said and keep saving until you have the 20% yourself. Keep in mind however, that if interest rates go up just 1% on a $1M property, that decreases your purchasing power by $103,000! With rates as low as they are right now, it may be worth getting in while you can and finding a property that you not only love, but where the seller can do a carry-back for you.

Call or email me if you need further assistance. These carry-backs are out there and I'm here to tell you that with a little creativity it can be done!

Web Reference:
0 votes
Jed Lane, Agent, Petaluma, CA
Thu Feb 26, 2009
We find ourselves in a ridiculous time right now. People like you, very credit worthy and ready to buy can't get access to money because of the bad decisions made iin the past couple of years.

While it completely makes sense for you to buy, now might not be the right time. My fellow Realtors will probably disagree with me but I would say wait, continue to sock as much away as possible while developing a relationship with lender you want to work with and an agent that you trust. When the lending pendulum starts to approach the normal range again you will be ready. 10% downs are not a thing of the past forever, lenders could use private mortgage insurance (PMI) like thay did in the past for buyers financing more than 80%. Right now it's hard to get a second from the same lender (80/10/10) or to find a different lender willing to take a second without charging an arm and a leg. All that said I have lenders that tell me they can get the seconds if the buyer needs it.

Also take this opportunity to write to your represtative in Washington, tell them your situation and ask that the confomring loan limits be set by region. The conforming limit should be set at 100% of median in every region.

What can you buy here for $521, 250 (LTV 80/20 on $417,000) as opposed to what can you buy in Tulsa OK for the same amount is not right and the system needs to be revised!
0 votes
Robert Spino…, Mortgage Broker Or Lender, Mill Valley, CA
Thu Feb 26, 2009

Your best bet: Somehow leverage the reinstatement of the $729,750 jumbo-conforming loan limit here in SF, along with the most amount you can dedicate to a down payment, while keeping the loan-to-value at or below 80%, and set your purchase price there. I know that's easier said than done and may rule a lot of properties out of the equation, but until the lending market frees up again, this will be your best chance for success.

When the housing market recovers, and it will, you can always move up and out.

Let me know if you have any questions or need any details, and good luck with your research.

Best regards,

Rob Spinosa
0 votes
Eileen Bermi…, Agent, San Francisco, CA
Thu Feb 26, 2009
Hi--Your question is best answered by a lender or mortgage broker, but since I've been conferring with several over the past week, I thought I'd give my two cents. Yes, any loan amounts above the conforming loan limit of $729,750 is considered to be a "jumbo" loan. This means you will need 20% (or more) to be able to obtain such a loan. There was an excellent article in the Wall St. Journal on Tuesday that addressed this very same question; I have posted the link below:

Ten percent down payments are possible via the conforming loan amount above, but your interest rate will not be as favorable as with a 20% down payment. I blogged about conforming loans this morning, see the link below. However, it sounds like a conforming loan will not get you what you want. I'd suggest continuing to work on the down payment; prices are likely going to remain soft. My opinion is that lenders will retain the current down payment requirements for some time to come.
0 votes
Tony Abad, Agent, El Cajon, CA
Thu Feb 26, 2009
FHA loans let you put only 3 1/2% down but the limit is much lower. Please call Keith at Wells Fargo. I have worked with him for a VERY long time and if he can't do it or doesn't know, he'll find out. The individuals inside the banks are not loan officers. I know this because I worked as a manager for both Bofa and Wells.

His contact info is:

Keith Parrett
Mortgage Consultant
Wells Fargo Home Mortgage
3361 Walnut Blvd
Brentwood, CA 94513
(925) 580-4650 Tel
(866) 494-0803 Fax
0 votes
, ,
Thu Feb 26, 2009
Hi M

Your loan would most likely fall under the "JUMBO " category. Currently mortgages above $625,500 do require 20% down. There is a much smaller investor appetite for these and they cannot be sold to Fannie Mae or Freddie Mac. This also means that approval and credit guidelines are much stricter.

A few days ago, however, FHA bumped up their loan limits through the end of 2009, so if you did and FHA loan you could borrow up to to $729,750. It won't get you your $1.1 Mil, but it's a little closer

Best of luck
0 votes
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