Jumbos - Supersize my loan

Hard money, super jumbo - is it really true!?! The quick answer is YES, we can lend these kinds of dollar amounts. In fact, we've started to see quite a few of these $1,000,000+ deals over the course of the last few weeks alone.

The jumbo loan has always been a deal that we've been able to get done, though it does take a little more finesse and diligence to do so. Let's delve into the inner workings of these super-sized loans in order to get a better understanding of how a lender looks at these larger loan amounts.

To begin with, it's good to realize that our continued moniker of 'common sense' plays even more of a role on these jumbos. As always, our worst-case scenario is to foreclose on the property and these large deals only increase this concern. Monthly payments are $10k+ always for the borrowers, as are our carrying costs. Selling these homes is tougher in the current real estate market - especially in light of the credit crunch(felt even more so in non-conforming, jumbo paper). In order to mitigate the risk, and these increased carrying costs, LTVs are going to be limited to 50-60% on the vast majority of these larger loans.

Documentation of income/assets is a MUST on these loans. We absolutely will not be able to do a Stated/Stated deal of over $1M, and really over $750k or so. We always want the payment stream on these deals and not the property. We have to ensure that the borrower(s) has/have the income (provable, documentable income) to make the payments. We also have to better understand their current story, why their seeking hard money, and what true benefit is derived from the deal. If they're self-employed we need more info on their business - how long in business, what they're doing, why they're seeking an 11-12% rate on their mortgage.

The appraisal and the current home's actual value becomes more valuable at the onset. We'll take a look at the date performed, the sold date(s) of the comps, the condition of the property, etc. A quick Zillow.com report will show us the other homes in the neighborhood and if they're truly in the same ball-park as the subject property. If the appraisal's showing $3M and the neighborhood is all in the $1.5M range, it makes us think twice. We're typically able to get a pretty good sense of the home's rough value within 60-120 seconds by looking at each at the appraisal and a Zillow.com neighborhood overview. Realtor.com is another good source to take a look at for current listing prices of homes in the area.

One must realize that a LOT of these deals, especially with older appraisals, have been shopped to all corners of the country in an effort to get them done. Realize that there's typically a reason they haven't - they're not good deals. This may be a factor of the property not being able to support the given valuation, the borrower not being able to support the projected monthly payments, or a combination of both.

At the end of the day, these loans are under a much finer toothed comb and more focused magnifying glass than our average $250k loan amount. There's more reward involved, but juxtaposed against increased risk. We WANT to close these deals, but we only want to close the best of these deals and the ones that make sense from all angles. As these historical times continue in our sector, those left are continually more risk averse. The super-sized loan, by nature, carries more risk - we need to mitigate that risk with solid value and solid borrowers.