Mortgage Strategies By Michele Francis HOUSE, September/October 2004

In our prior article we discussed the benefits of utilizing the Piggy Back mortgage strategy to benefit those homeowners who are buying new and expect proceeds from the sale of their current residence. This enables the homeowner to have a significantly lower blended rate of interest, savings on closing cost and the ability to radically reduce the amount of mortgage carried once the proceeds from the sale of their existing home becomes available.
Recently I came upon a mortgage program which I am delighted to write about due to its unique features. It is known as a Rewards Program which is designed to meet the needs of the higher end purchaser who has exceptional credit.

Let us use an example of a client who recently utilized the program to purchase his primary residence for a sales price of $1,250,000.00. In this case the client had excellent credit scores of above 730. However, the challenges we encountered were related to employment. The client is a surgeon who has recently joined a practice and contracted with a hospital. We know moving forward the income stream will be more than sufficient to cover his payments; however there is no two year history which is normally required for this type transaction. In addition the client had recently received a large distribution from an estate which comprises the bulk of his assets in contrast to a savings pattern which is preferred for underwriting purposes. Based upon these circumstances we chose to structure this loan as a Stated Income/Stated Asset Mortgage under the Rewards Program.

This wonderful program suits this scenario perfectly. It is presently offered through a portfolio lender and allows for a client to borrow up to 80% of the purchase price, with a maximum loan amount of $1,000,000.00. The lender will accept verbal verification of employment only in lieu of Federal Tax Returns, W-2’s and pay stubs. Furthermore, the lender does not require verification of assets. The assets are simply stated on the mortgage loan application and no additional confirmation is required. This program is currently open to fixed rate loan programs only; both 15 and 30 year terms are available.

There is no “add-on” or points for the privilege of simply stating your income and assets. In addition, pricing for these jumbo mortgages is extremely competitive.

This mortgage strategy has certainly grown in popularity since its inception. Prior to this program making the scene we were utilizing No Income/ No Asset strategies which were costly and only offered the borrower up to 70% of the value of the property. When considering the alternative programs available for this profile borrower the Rewards Program is a home run.