100% financing and interest only loans

Financing, Hard Money Lenders, Private Money
1

Here’s my skinny. Looking for help with how to make my money go the furthest.

I own a Home with a 26 1/2 years mortage & $138000 left @ 6 3/4%

Avg sales in our market (Orlando, FL) for our house is now $275000

Moving to Hawaii to live and work (will rent while there)
Need to put the money we will get from proceeds of primary residence somewhere so as not to have to pay capital gains.

Looking to get one sfh to call primary residence in Orlando area and use as a short term rental once we move to Hawaii (is this illeagal or unethical to get loan and get house as primary residence when getting loan but use as short term rental? We will live in it for a few months before moving) What are best financing options here? Interest only as we are not looking to keep it forever and just really want it to pay for itself in renting as we want the increase in equity down the road? Financing with traditional? If so, how much down should we pay?

The second part of this equation is we’d like to purchase a few more properties as rentals as well. Once we sell our primary residence, I guess the big question is how can we make our $150000 or so in cash go furthest. Not looking for income or positive cash flow really as the primary goal will be to sell the properties down the road and take out the increased equity. How much cash should we keep in reserves for making payments if the house/condo/etc doesn’t rent, repairs, exp. etc?

In regards to 100% financing, does that mean we would get a loan for 100% of the homes value? If so, I assume we would have to pay mortage insurance. Is this the same with interest only mortages?

I realize the responses could (and possibly have) fill a book, but I’'m just looking for some ideas before we go forward from people that have done these type of deals before.

Thanks for your advice ahead of time.

2

Well interest only FLorida in my opinion is the way to go. I am mortgage broker in southern FLorida and the way that housing prices are increasing you could gain more equity in your home then you would pay moff the principal by taking a conventional mortgage.

As far as the mortgage insurance goes you might be able to get 100% financing through means of an 80/20 loan. That is where the loan is divided into two parts to avoid pmi (private mortgage insurance). Some banks also have lender paid PMI. They adjust the rate that you would qualify for accordingly and your PMI would be covered.

Keep in mind a lot of this also depende on your income and your credit rating.

3

Great. My next question would about the 80/20. Do I take out two loans then? One being the 20% to pay the down payment? if so, is this done through two seperate banks or one?

Will banks do 100% finacing with interest only loans or only conventionals?

As far as the bank covered PMI, wouldn’t I still be paying the same amt. with the higher rate as if i had to pay the PMI?

We are a dual income household (me and my wife) earning nearly $100,000 and my score was 699 last time I inquired and hers was 714.

Thanks again for any help anyone can provide

4

Here’s my skinny. Looking for help with how to make my money go the furthest.

I own a Home with a 26 1/2 years mortage & $138000 left @ 6 3/4%

Avg sales in our market (Orlando, FL) for our house is now $275000

Moving to Hawaii to live and work (will rent while there)
Need to put the money we will get from proceeds of primary residence somewhere so as not to have to pay capital gains.

You will not have capital gains on your primary residence you do not have 250k or with spouse it is 500k spread

Looking to get one sfh to call primary residence in Orlando area and use as a short term rental once we move to Hawaii (is this illeagal or unethical to get loan and get house as primary residence when getting loan but use as short term rental?

ILLEGAL? NO you have lived there and you will live there for a while after you get the loan.

You can rent out your home if you need to there is no law against that.

UNETHICAL? YES, to me it is just because you know your exit strategy and it all dependes on your values.

We will live in it for a few months before moving) What are best financing options here?

My question would be HOW LONG TO YOU PLAN ON KEEPING THIS HOUSE?

renting it for a till it is paid off or keeping it longer then 10 years well then interest only would not be my suggestion.

Renting it out for a few years or doing a Lease Option to Purchase?

Well then an interest only would be a good option because you are keeping it less then 10 years.

Interest only as we are not looking to keep it forever and just really want it to pay for itself in renting as we want the increase in equity down the road?

The real question is are you going to keep it less then 10 years?

Financing with traditional? If so, how much down should we pay?

This question is not as clear and I will work on answering it the best I can with limited info

All financing with a bank is traditional and how much down should you pay? Well in my oppinion nothing.

The second part of this equation is we’d like to purchase a few more properties as rentals as well. Once we sell our primary residence, I guess the big question is how can we make our $150000 or so in cash go furthest.

ALWAYS USE AS MUCH OPM AS POSSIBLE!!!

There are billions and trillions of dollars to use of OPM

USE your money just for reserves and little down payments not big ones.

Not looking for income or positive cash flow really as the primary goal will be to sell the properties down the road and take out the increased equity. How much cash should we keep in reserves for making payments if the house/condo/etc doesn’t rent, repairs, exp. etc?

A good rule of thumb is 6 MO. and 25% of rent for repairs,etc.

This is what lenders use also to qualify the home.

In regards to 100% financing, does that mean we would get a loan for 100% of the homes value?

YES AND YES!!!

If so, I assume we would have to pay mortage insurance. Is this the same with interest only mortages?

Not nessessarily, Some programs are self insured in the interest rate.

Usually about a 1% higher rate to insure it.

I like it better when the programs offer self insured programs because it is tax right off and mortgage insurance is NOT

(I am not the IRS or a CPA so this is my little disclosure)

I realize the responses could (and possibly have) fill a book, but I’'m just looking for some ideas before we go forward from people that have done these type of deals before.

Thanks for your advice ahead of time.

5

I guess it just doesn’t seem plausible that it works this way. I know everything hinges on the property renting, but assuming it rents, why doesn’t everyone do this?

My question on traditional financing was meant to say standard 30 year fixed but we do not plan on keeping the property more than 10 years. We are mainly just looking for a place to put our money to grow after we sell our current house until we return to the mainland to buy our next house. Timeframe will be 5 - 10 years max.

My next question would be assuming our above financial information, what is the likelyhood of getting multiple loans for investment property to rent out as short term rentals? Also getting multiple interest only loans or multiple 100% financed loans? I guess i’m just stuck with the idea that lenders want capital down to lend us money. The idea that people will finance the whole thing is odd to me. But I guess if they’re getting their interest each month they’re happy. When will they consider us too stretched out and at risk? After 1 home, 2? i’m sure it varies but again assume the information provided above and a best guess with what you may have encountered in your past.

Lastly, where should/would we go to get approved for these loans? I’ve read countrywide. Are there others people would suggest?

Thanks again…

6

Great. My next question would about the 80/20. Do I take out two loans then? One being the 20% to pay the down payment? if so, is this done through two seperate banks or one?

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Yes it is a first mortgage 80% LTV with a second mortgage of 20%

This can also be done with several combinations to equal 100%

Yes it can be done with two different banks and most of the time it is done with the same bank

Will banks do 100% finacing with interest only loans or only conventionals?

Yes, you can get 100% financing with your fico scores

The only thing I do not know is what kind of Documentation you are going like can I prove your income with W2’s or 1040 or do you need to go stated?

As far as the bank covered PMI, wouldn’t I still be paying the same amt. with the higher rate as if i had to pay the PMI?

Yes is some cases. and in some you could actually pay less then what you would with PMI

We are a dual income household (me and my wife) earning nearly $100,000 and my score was 699 last time I inquired and hers was 714.
I guess it just doesn’t seem plausible that it works this way. I know everything hinges on the property renting, but assuming it rents, why doesn’t everyone do this?

Good Question EVERYONE should be doing this I guess some people are afraid to make money is the only plausible answer

My question on traditional financing was meant to say standard 30 year fixed but we do not plan on keeping the property more than 10 years. We are mainly just looking for a place to put our money to grow after we sell our current house until we return to the mainland to buy our next house. Timeframe will be 5 - 10 years max.

Well Real Estate is the only avenue that I know average people with average knowledge base about Real Estate is a good way to place there money and get returns

You could also be a Private investor with your money too.

My next question would be assuming our above financial information, what is the likelyhood of getting multiple loans for investment property to rent out as short term rentals?

EASY EASY EASY

Also getting multiple interest only loans or multiple 100% financed loans?

Easy look at the thread that talks about multiple properties

I guess i’m just stuck with the idea that lenders want capital down to lend us money. The idea that people will finance the whole thing is odd to me. But I guess if they’re getting their interest each month they’re happy. When will they consider us too stretched out and at risk? After 1 home, 2? i’m sure it varies but again assume the information provided above and a best guess with what you may have encountered in your past.

Infinate amount of homes can be bought by you and your wife especially if you buy some and she buys some

THIS SHOULD HELP OPEN YOUR EYES TO A HUDGE INDUSTRY and lots of $$$$ ::slight_smile:

Lastly, where should/would we go to get approved for these loans? I’ve read countrywide. Are there others people would suggest?

SEE THIS THREAD for other 100% financing Ideas

http://www.reiclub.com/forums/index.php?board=26;action=display;threadid=4002

Thanks again…