Duplex w/ 100% Financing?

Always love reading everyone’s posts. Really great advice that makes me more wise each time I read it. Quick question for anyone that has a clue:

I’m thinking of buying a duplex locally in my area (south carolina) if I go 100% financing w/o being owner occupied will I have trouble? I want to get residential rates. Let me know your thoughts. Thanks!

Not sure if your state is very different, but on average, lenders seem fine lately with 90% non owner-occupied properties. 80/20 is available, but the rates seemed pretty high compared to putting down 10%. I think you may also need better credit.

A lender can give you a Good Faith Estimate to show each scenario. It’s not impossible to have 100%, but the cost may not be worth it, especially if you have to go to a private lender.

if I go 100% financing w/o being owner occupied will I have trouble?

Depending on your parameters (credit, income, assets, etc.) there are 100% investment property programs.

I want to get residential rates.

Probably not going to happen. Investor rates are going to be higher than normal residential rates as they are higher risk to the lender. On average, investor rates are about a percent higher than conforming rates. Again rates will vary depending on parameters.

You can get the residential rates (or even a low downpayment HUD loan) if you occupy one of the units…

I currently take a hit of about 1/4% for investor loans vis-à-vis an O/O.

Your mileage may vary according to wind, weather, driving habits…


100% financing is available, you just have to know where to look. My suggestion is to find a local, preferrably referred mortgage broker that specializes in investor loans and have them do the searching for you. Personally, I think that it’s worth the money!

You will get residential rates (as opposed to commerical), however, they will be for a non-owner occuppied (investor) loan, which is generally 1/2 to 1 point higher than occupied rates.

You credit score, DTI, and the property itself will determine how many financing options that you have available.

The big question is what price are you 100% financing? By that, I mean it makes a big difference if you’re trying to buy at FMV and get 100% financing (example FMV = $100K, you’re buying at $98K), or if you’re trying to get 100% financing on a 50% of value purchase (example $100K FMV, buying at $50K).

It’s much easier to get 100% financing when there is equity in the property.


Your financing options are directly effected by the deal and how creative the seller is willing to get! For instance I bought one last week

Appraised at $204,000.00

I bought it for $160,000.00

Here is the catch I showed the owner was going to carry the 20% and did the contract for 204k owner’s note is $40,800 So I got an 80% mortgage note for the property!

After closing I already contracted to purchase the note for $.01 cent on the dollar So I bought that note from under them proir to closing!

This shows that it is not the financing it is the DEAL!! Hope this helps

Remember that the 90% is on the appraised value after it is fixed up. If you buy the property at a low enough price, you can finance 100% of it as long as that dollar figure is 90% of the appraised fixed up value. I hope this helps.

Hey Clark, where are you SC are you from? I live in Columbia but go to school in Anderson.

Columbia, SC is my market, but there seems to be some good growth in Anderson as well.

The reason I asked the question about being owner occupied is that I am considering moving into one side of the duplex.


…"I bought it for $160,000.00

Here is the catch I showed the owner was going to carry the 20% and did the contract for 204k owner’s note is $40,800 So I got an 80% mortgage note for the property!

After closing I already contracted to purchase the note for $.01 cent on the dollar So I bought that note from under them proir to closing! "…

I don’t quite understand the machinations here. Why contract to buy for $204K with the owner’s consent to basically write off the second mortgage? Although I am admittedly new to this game banks it seems logical the bank would lend the $160K without the second mortgage as long as the property appraises. The only issue I can think of is capital gains tax avoidance (??), although there must also be some tax consequences to the 1% buyout of the second mtg. I’m hoping reoconsultant can fill in some of the blanks and educate us all on the purpose of the second mtg.

If you are truly going to move into the property then rates and terms will absolutely get better.

jmd -

The 80% loan without showing a seller carried second with a sales price of 204,000 would require REO to show that he had 44K in cash available at closing. Showing this ‘phantom’ second relieves that necessity. Had he just lowered his purchase price to $160,000 then the LTV would be 100% instead of 80% because LTV is based on the lesser of the appraised value or sales price. Remember, the ‘worth’ of anything is really only what people are willing to pay for it. So if someone pays $160,000 for a property, it doesn’t really matter that an appraiser is saying it could be worth $204,000 because it’s only worth $160K if that is all you can sell it for. So reoconsultants is circumventing that by showing that it’s worth $204k because that’s what is being paid for it and what the appraiser said it would most likely be worth.

JMD Forest.

Creating a “write off” 2nd mortgage so you can get into the property at a lower ltv is illegal.

The governtment and lenders consider this fraud.

Correct, this is loan fraud and it is illegal. Lying on a loan application on a stated income product is also illegal. I’m not condoning it, I’m just explaining why it worked.

Bear in mind that agreements between Seller and Buyer where the Seller gives ‘cash back at closing’ is illegal and fraudulent if they sign a Real Estate certification that there are no outside agreements. Real Estate Brokers that give cash back at closing and sign the Real Estate Certification are also committing loan fraud. Gifts made to a borrower from a family member that are to be repaid are also fraudulent because the gifts are understood (and so written in the gift documentation) as forgiven and thus not repaid. Buying a house as a primary residence when you are not utilizing it as a primary residence is fraud. Qualifying someone on un-improved taxes when improved taxes would render the ratios too high to approve is fraud. Sending ONE contract to a lender and a different contract to the title company is fraud. Etc, etc, etc.

There are a number of things that happen daily in these transactions that are fraudulent. I think it goes without saying that no one here is condoning fraud. However, condoning it and explaining why it works are NOT the same thing. I can explain why someone may have gotten away with Murder…but I am not condoning it.

Investment and DFW:

This is why I asked the question - something didn’t seem quite right and that is why I asked for an explanation.

I now understand a little why REO might want to show 80% LTV but (even though I admittedly am new at this) since there are 100% financing deals available I would suspect they would be glad to finance 100% of a property that appraises at 125% of loan value.

Even so, I would not be so fast to assume fraud here. Many 2nd mtgs are heavily discounted when sold. The discounted mtg may have even been sold to a seperate legal entity (LLC, corp) not otherwise involved in the transaction.


Man, people really like to point those fingers, don’t they?

Hey, I don’t know all the details of the transaction, but from what was posted, I see no fraud there.

First, there was no “phantom” second mortgage. It was a legally created 2nd note and it was presented to the primary lender in the package. By calling it a phantom 2nd, you’re assuming that it was never created or that it wasn’t reported to the primary lender, which is false.

Second, REO bought the 2nd at a discount. It wasn’t a “write-off” 2nd, where the seller just considers it “paid in full” at closing. Mortgage notes are bought at a discount all the time. In fact, that is one of the methods of RE investing, if you want to read some on here. Hey, lenders sell notes at the closing table all the time, too. But because REO did it, you’re spouting out that it’s fraud and illegal?

Third, just because REO bought it at a discount doesn’t make anything illegal. The lienholder can do whatever he wants with the note whenever he wishes. Anybody ever here of shortsales? Even if REO didn’t buy the note, the seller could still have offered a discount for a quick payoff (Hey, REO may even offer that to himself!). Or he could have chosen to wait on the full amount.

Maybe REO’s company bought the property and REO, himself, bought the note. So now, REOconsultants has to pay REO a monthly payment. Don’t know, but it works for me.

And maybe, before you know all the facts, or start putting more in than what’s given, we all leave our fingers in our pockets a little longer. It may go off.

Merry Christmas and Happy Holidays!


Explain it to the lender before you close. Ask them if they’d still approve it.

Call the Fed’s ask them too? Let the know that’s common practice for you. If you have a couple example loans they may want to see them.

Roger J -

I don’t have a problem with what Reo did. Personally, I err on the side of business any time I can. However my personal feelings have no bearing on whether it’s considered fraud or not.

Having this 2nd note that he had agreed to buy at $.01 on the dollar prior to the loan transaction with the lender constitutes fraud. That is going strictly off what reo is stating in his original post about a pre-arranged price for the note. It is a ‘phantom’ 2nd insofar as from the beginning the note isn’t worth the paper it’s recorded on because it’s already been sold for 1% of the face value. The value of the note is non-existant hence my term ‘phantom’.

Just as anything in law it’s the INTENTION that is in question. His intention is to deceive the lender into an 80% loan based on facts that he has not presented in his loan package. Any time you misrepresent the truth for the purposes of deception it is FRAUD. No if’s-and’s-or but’s. In fact there was a case of a real estate agent in Florida who went to jail for loan fraud. What she was guilty of is signing the real estate certification that there were no outside agreements other than those presented in the purchase agreement when in fact she was recording a second lien shortly after closing on the properties. She was giving the borrower’s funds to close on the primary loan from the note she was recording after closing. It was her signing of the real estate certification that showed that she had deceived the lender because she did indeed have an outside agreement (much like purchasing a discounted second beforehand).

That being said, I have no problem with these types of transactions anyway from an ethical standpoint. I personally think that alot of the lending rules or guidelines are not well thought out. I have issue with the fact that lenders (the one I work for included) have issue with seasoning on properties. I personally think it’s good business to buy something for less than you know you can sell it for, then sell it for as much as you can as soon as you can. However lenders are over protective of their risks and don’t allow this in many cases. FHA won’t even budge on the 90 days from previous transaction seasoning on new contracts. It’s not the investors fault they got a good deal and immediately ‘flipped’ it to a retail buyer.

Roger you speak of the legal issues that real estate agents face daily, I’m certain you can appreciate how purposefully misrepresenting the facts of a transaction to a lender is loan fraud.

Look at it like this!!

  1. Did I tell the lender the owner was going to carry a second YES

  2. Did I buy the Property for more then appraised value? NO

  3. Is it really relevant to the lender what the note holder does with that note? NO

  4. Do most mortgage bankers service the note themselves or do they sell the paper?

THEY SELL THERE PAPER unless they are one of your larger banks!

So you are telling me it is FRAUD to buy a note at a discount?

Lets say the property was in foreclosure and I acquired it after doing a short sale so there for I bought a note for a lower discount would that be fraud as well?

NO it is what you call getting a deal! You should look into getting deals they are really nice!!

Also Raj was correct in saying Robb bought the property and a company holds the note!

The fraudulent thing about the deal was negotiating the sale of the second note at a discount prior to the transaction. It’s all about the real estate certification that you sign with the seller that states that you have NO outside agreements, verbal or otherwise, other than the purchase agreement.

You are purposefully defrauding the lender into giving you a lower rate and no MI based on information you know at the time to be false.

For instance, if you are currently employed and w-2’d and you qualify on income of what you make today but you have already put in your notice to quit your job after the loan closes. That is fraud to not disclose this.

It’s silly, and I don’t agree with it, but it is fraud. The real test is easy. If you disclosed that you had this agreement with the seller would the Lender have proceeded with the loan with the same terms? If the answer is no, then you witheld information for the purposes of deciving the lender. It’s fraud.

Does that mean it’s not good business? Does it mean that you weren’t just doing what America has been founded on (Capitalism)? No, I’m not disagreeing with you, I don’t have a problem with good business (buy low, sell high). But rationalizing something doesn’t mean it’s not illegal (which defrauding a lender / creditor is illegal).