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Lending Outside the Box

Lending Outside the Box


GoodCredit.com recently reported that some lenders are starting to offer non-traditional interest-only mortgages again.  Now a non-bank lender is going even more non-traditional, providing jumbo mortgages to physicians and other professionals fresh out of school with as little as a 10% down payment with no private mortgage insurance (“PMI”) and no origination charge.  (A jumbo mortgage is one which will not be eligible for purchase by Fannie Mae or Freddie Mac because it exceeds a certain limit, generally $417,000.)

Social Finance, Inc. (often referred to as “SoFi”) claims that its innovative methods allow it to typically close one of these loans within 30 days.  The company uses a “virtual appraisal” in the early stages of the process — purchase prices of comparable properties are analyzed rather than a traditional appraisal where someone visits the property before compiling a report, thereby accelerating the mortgage application process (however, a traditional appraisal is later performed).  SoFi also saves time for its customers through use of a mobile loan application process, allowing them to do almost everything through their smartphone, tablet or laptop computer.  It is currently able to offer mortgages in about two dozen states.

So it sounds like you can get one of these loans and buy your expensive dream home straight out of law school despite your mountain of student loans?  Maybe.  You’ll need good credit, and you better have obtained your education from a top-rated school on SoFi’s approved list (SoFi was founded by Stanford graduates as a peer-to-peer student loan refinancing firm, so a law degree from St. Copius of Northern Nebraska with an undergraduate degree from Faber or Adams College wouldn’t make the cut.)  If you can get a SoFi loan the money you save from a lower down payment, no PMI and zero origination charge could be somewhat offset by a higher interest rate than another lender might charge.  However, if another lender won’t give you a loan under your circumstances then this might be a price worth paying.

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