I am getting ready to start my 4th rehab and I have the initial loan all worked out. It is a HUD house that was appraised at $47K 6 months ago and We got it for $35K. It needs about 5K in rehab and is should be worth about $70k. We have done our due diligence and found several good comparables that should sustain the ARVA. This rehab should be less than two weeks.
My question is how easy is it to get a 90% LTV cash out refinance on investment property. This would be a Stated Income or Asset type loan. We just completed a rehab and moved into it for a primary residence and we were able to get cash out. 660 FICO score.
I have one lender that says he can do it but I would like to hear other peoples experiences.
You’ll need an AltA loan and the guidelines on these vary from lender to lender. There is actually a series of questions that needs to be asked in regards to both the property and investor.
660 should be ok but the score is not the only thing important factor on the credit report. The # of tradelines and legth of history is reviewed too.
If you’re 2nd guessing your broker, then obivously he hasnt made you feel comfortable in his knowledge of the industry. You should definetly consider discussing your goals with others.
Another thought is that since you bought the property only 6 months ago, most lenders will not do a cash out refinance because of “seasoning” issues- you have to own the property for at least a year before they will take appraised value instead of sales price. This doesn’t go for all lenders, some only require 6 months seasoning, and others no seasoning (these are far and few between). So, it would depend on the guidelines of the lenders who do not have the seasoning rules as to whether you can do a cash out refinance. The other option is a rehab/ construction loan, however, the lenders I deal with do not do them on an investment property.
You can do it…your just going to get smacked on the rate. One lender who used to do a lot of these at 620 Stated 100% no seasoning cash out just cut their exposure back to 95%, but 90% is still available.
Keep me posted NDI. You have to find someone that thinks creatively and is a seasoned professional with those types of deals. Continue to call other companies WITHOUT them running your credit. I know its a pain in the a$$ but it might be worth it if you get the right person who can save you some bucks and get what you want. Keep me posted,
Thanks for the comments, I am out of cell phone range most of the day but I will be able to make some calls in the morning to follow up with the people who have responded. What are the typical points and interest rates for these types of loans? I want to make sure that I don’'t get hit with unreasonable rates. I do expect the rates to be above the normal home loans. The house should still cash flow after the cash out refinance.
Nothing’s typical when it comes to these alt a/portfolio loans.
There are multiple factors that need to be consider.
I’m sure somebody here will throw “up” out some numbers for you. Don’t forget to ask if it has a prepay, fixed or arm, origination/broker/discount fees.
Don’t pay “points” for the loan…90% of the time it does not make sense.
As far as rates goes…well like “investment loans” says, they are not typical. You guessed right, they are a good deal higher than a “typical” home loan.
Any broker is going to have access to the same lenders that offer these products and these lenders are going to charge the same lender fees and offer the same rates no matter what broker they are working with.
Look out for junk fees. Office/admin fees should be under $600. Underwriting fees (a lender fee) should be under $800. Most originators (loan officers) charge between 1% and 2% of the loan amount. Most loan officers will charge for the credit report they pull (about $15). Any other fees you see on the GFE that are not for title, taxes, insurance, PMI, days of interest or goverment recording… are junk.
This can be done 100%, stated or no ratio with a 660 mid score, 12 months mtg history, 3 trades for 24 months and not more than three properties owned. This is with no title/appraisal seasoning. Same for 90%, unlimited properties, with not the greatest terms.
Keep in mind… purchasing investment properties, rehabbing and doing cash out refis to make a living is a dead end. This can be done to get you started or to help during hard times. Do not make this your bread and butter.
Find a broker in your area that works with investors. This is very specific lending that requires knowledge in the area.
I understand where you are going with your response Fl_Mortgage_Broker. The property in question is located in a small town in rural ND and it is about 2 miles from a new processing plant that is going to employ about 80 people. The plant construction is scheduled to start in Feb of 2006. The town is only about 200 people and there is no available housing within 40 miles. These people will need someplace to live. I am making my projections on the current market conditions so I should not be burned if the project falls through.
They have spent several million dollars in studies and environmental impact statements. The project has been pushed back about three years from when it was first proposed. Things are looking pretty favorable for construction to start next year. Property values should double in less than two years. My plan is to rent rooms for the two years during construction of the plant and then sell after they complete the plant.
I have started thinking of alternatives such as a Bed and Breakfast at this house as well. There are currently 3 Bedrooms and I could easily add three more in the basement. It will not be a problem putting in egress windows.
I typically do flips and some rentals. I feel that I can speculate and take some risks at this point. I agree that cash out refi’s is not a way to make a living. You still have to pay them back. The house should cash flow with a little extra. I plan on having it rented before closing.
I am always looking for new ways to making a better living in this business.
