I believe I am labeling this correctly. I need some help.
I am planning on purchasing a property in Texas at the foreclosure auction on the courthouse steps. In Texas (or at least the county I am planning on purchasing in) you need cash at the time of the auction. Not really a problem since I am arranging in advance for HELOC money to cover it.
My dilemma is that once I buy the property I want to finance it through a conventional lender (bank) and get my HELOC money back so I can setup for the next deal. My lender is telling me that in order to do this I will need a cash out loan and with investor/stated/cashout I am looking at minimum 8.5% with at least 4 points!!! Yikes.
Is this true or is it time to find a new broker?
Any suggestions on different approaches?
I will probably be keeping the property for rental
Credit score is 720ish
Thank you.
The loan will be for about 100k. I just was shocked when it went from 6.5% with 1 point to 8.5 with 4.
Can someone explain why the difference? I seems that the rate is for a non-secured loan but I am willing to put the deed up as collateral and only take the loan out for 80% ltv max.
Could I legally buy the property at auction under an LLC and sell it to myself later to get the better rate? Or, can I immediately take out a home equity loan if I buy it at the auction and if so, how will this impact my credit score. How many times could I do that? My goal is to not expose my HELOC money from my personal residence for investment property. I want to get it back as soon as possible.
Any other thoughts?
Have you had previous dealings with this lender? If not I would question why the sudden change in rate. Were they not listening when you first approached them? Did they not understand the parameters of the loan? Why would it be non-secured when It has a deed?
This is my first time dealing with this guy - actually first time dealing with a broker that wasn’t for a personal residence.
We have been communicating on this through email so it is relatively simple to get off track and out of sync. I wanted to get some input from this board before we spoke in person.
You need to start with giving him the complete scenario.
Value of the property.
It is a refinance. Make sure that he/she understands that there may be a seasoning issue as you just purchased it.
Give him/her the outline of your personal situation, i.e., income, credit score, assets, etc. Do not have them pull credit yet!
Find out the best scenario. LTV, Rate, Points, etc.
Since you have not used this individual, you may want to talk with another broker. This will allow you to compare.
I am confused as to how the rate can jump so quickly. Was the broker not informed of the parameters initially?
Hi Tomoc,
Yes, make sure you tell him about the fact that you just bought it. It drastically changes the programs that you’ll qualify for in terms of getting cash out. For example, the programs that are priced in that range limit cash out to much lower LTV’s…75% compared to 100% on a purchase. If you need much more, expect to pay more. There are some other things that you’ll need to specify in order to get an accurate quote. Is it a single family, a 2-4 fam or condo?
Can you verify income and assets or do you need some type of no income/no asset loan. Do you have a current job that can be verified? Do you have 6 months worth of mortgage payments in the bank verifiable not counting the cash-out amount? There are lots of little differences that can change the rate/pts. Have it together when you call around or be willing to give a full application so the loan officer can really figure out which program to price. If your guy hasn’t gotten that yet, he may be estimating high. Oh, is it a 30 year fixed or an adjustable? Are there pre-payment penalties? Be sure to ask. It can make a huge difference! Good luck, Sandra
It does not hurt you to talk to another lender. Just make sure no one is pulling your credit score to give you an estimate.
Are you sure that you can not go full doc? Why do you need to do a stated income loan? Also the lower the Loan to value (LTV)
the better the rate.
Good Luck
Just out of curiosity, I priced your loan scenario to see if your guy is competetive. I used a Cash out, No Ratio, investor product with a 720 or better credit score on a single family. At 75% LTV, the 30 year with a 6 mo pre-pay penalty is 7.125 with 3 pts. A 7 year adjustable will allow you to go up in rate to 7.375% with only 2 pts. The lowest points will be a 7 year with a 3 year pre-pay at 7.375% w/1.5pts. When you take the longer term pre-pay, you’re less likely to pay it off quickly, so they’ll let you buy up the rate with less out of pocket at closing. These rates are not much higher than a regular FNMA loan, so you’re not in such bad shape if you pay cash for it and refi. These are about the same as no income FNMA loans, but you would be able to get away with as little as 1 pt. with no pre-pay if it was a purchase. FNMA doesn’t allow a cash-out refi on an investor at all, that’s why you have to go with a different product. Good luck! Sandra