I live in a community where there is an abundance of SFH under $30,000 that would make excellent rentals. My brother-in-law and I would like to start buying some of these properties. The problem is that we don’t want to put any money down and it would be nice to not have to fork out $3000 out of pocket for closing costs. Is there a lender that will let the seller pay the closing costs as well as give us 100% financing?
Details: 2 bed 1 bath house, owner will sell for $15,000 appraises at $20,000, average monthly rent is $375-$425
My brother-in-law would be the one obtaining the financing and his credit score is around 780. Is there anyone that can help?
People have been posting lately regarding unsecured lines of credit on this website. That is probably what you will need to get a loan that small. Heck with credit like that you could probaly open a visa/m.c./am. ex. with that large of a credit limit.
I like the credit card idea. Also visit with local banks. Their closing costs should be inexpensive and they know the area very well and like to lend in their backyard. That’s where I go for my financing and have yet to be disappointed. Give it a shot.
Back here in Los Angeles, you can’t even get into South Central for under $300K. Skid Row Condos are selling for $600K and up. So …what are these properties located and what condition are they in?
Thanks for the ideas everyone. These properties I am talking about are in Southeast Kansas. They are nice properties and make great rentals. If I had an investor that would lend me the money he/she could be earning 10% on their money. Most banking institutions don’t want to loan this amount of money, even home town banks.
I think the best way is to pay cash then do a home equity loan after you own it. Make sure it’s a home equity loan with a fixed rate so your costs are certain. Then you can easily calculate how well they will cash flow for you.
I’ve found the same thing on loans under $50k. Most banks won’t even touch them. They can’t charge enough in lender fees to make it worthwhile. Laws limit lender fees to 8% of the value of the loan.
Actually that restriction only applies towards owner occupied properties. It’s falls under Section 32 of RESPA.
A broker can charge higher fees on investment properties should he choose to.
Most banks and lenders don’t have programs for the lower loan amounts, especially 100% financing. There are some some lenders that do offer 90% loans down to $20K. A lot of brokers will tell you they won’t or can’t do these, not enough $ in it for them. Not true. The draw back for the investor is that on lower loan amounts there’s going to be more in costs. Normally a broker also gets compensated from the lender for the interest rate we lock you in at. There’s very little from the lender on those loans so more origination is charged.
Not everyone has the resources to pay cash or get unsecured lines. Hard money loans work well too for buying lower valued properties. If someone is buying a property well below market value the HML should be able to fund the whole deal, including closing costs. Short term loan that would have to be refinanced, possibly with cash back. Terms would be great because the ltv would be much lower being based upon the true value.
I have the same deal in western Illinois
Quality homes can be bought retail for under 50K.
I bought a 4bdrm.1-1.2 bath bank repo for 14K last year!
All it needed were cosmetics
It appraised for 65K
I would say the best to do is buy it cash and do a HELOC afterwards. I think you may have a hard tiem finding someone who would be interested in doing loans that small. There is a good amount of work involved in originating and processing a loan. since most loan officers work on comission which is a percentage of a loan amount they may not eb interested. A house for 39k might bring a loan officer only a small amount of money and he would probably view the work not worth the money.
then that’s a bad LO because if you do the work for a small deal like that and get it done for your investor then that investor will turn around and come back when the HML needs to refinance. TWO deals in less then 60 days. But also the LO can’t try to make all the money off one deal. If you can come to a medium then these deals can work out for everyone.
The mortgage broker can make want they need to off of these lower loan amounts. Most of them do not realize it.
As a mortgage professional, we should be compensated for the work that is done on behalf of a client. You’ll find that most brokers are looking to make about $2,500 - $3,000. Some will even go lower than this. In my last reply I commented that this can come either in the form of origination charged at closing or from the lender based upon the rate locked in. On a loan this small, you’re probably only looking at about $500-$750 that can be made off the rate. This means that rest will be made up in origination. On investment properties, there’s no restrictions as to what can be charged.
You have to remember also that most originators out there work for somebody else. This means that any of the above income collected off the loan has to be split with the owner of the company. The majority of loan officers out there have some type of low commission split like 50%.
These loans can be done, but as a client, the investor just has to realize that there is a cost to this loan just like any other transaction. Find a broker who will charge you the same amount for each loan no matter if it’s a $30,000 loan, $150,000 loan, or $400,000.