I am a beginner and I have a question

Hello everyone,

Im a twenty year old male from north Georgia. I go by Matt. I have been thinking about investing for several months now. I remember when i was applying for a home loan they asked is this going to be ur primary residence and I told them yes. Now what I need to know is will I have to tell them something different or even try for something other than a home loan. I dont like the idea of owner financing, I dont have to do it Ive got good credit. Any sort of information would be greatly appreciated. I hope to hear from you guys really soon.

Howdy Matt:

How is live in Geargia? My dada was born there and I lived there for a while too when I was young. He has born near Athens in Crawford.

When applying for a home loan for investment property it is best to tell the truth especially if you have a paper trail that shows you live somewhere else and especially if you are dealing with Hud. Live is too short for jail or even the hastle of fighting lawsuits and court.

I do not know why you do not like owner financing. It can be the quickest and easiest method to aquire a lot of property with little cash if you can find no equity deals or deals where they own the house free and clear. I have put together deals where the owner carried a second when I got a new first mortgage and I actually did get $10,000 cash at closing and all the parties knew.

Another good thing about owner financing is that they do not report to credit bureaus and the loans will not show up as yours. A lot of lenders limit the number of loans you can have in your name and these will not be. You can also avoid this by using a corp or other entity to own the properties.

Hope some of this helps

Thanks Ted,

That was very helpful but another one of my concerns is about the owner financing. Would I get some sort of deed saying that i am the property owner, except there is a lein hold on it. Also, if I were to apply for a mortgage would i not get the same sort of benefits as someone buying it for their primary residence. Ok, now I got preaproved for a 100% conventional up to 80,000 dollars at 6.25% for 360 months. I dont think they would give u such benifits if u told them u were just buying it to try and make some money in the long run or u were just going to rent it out to earn equity. If u can tell me anymore about this I would really appreciate it.

How rude of me. Things are great here in Georgia Ted. Its a little hot though right now.

Howdy again Matt:

Most owner financed deals involve a deed from the seller with a note and deed of trust to the owner securing the financing. These are in Deed of Trust states and may be called something different in Georgia. There are other options too like a lease option or a contract for deed although the cfd is not a good option in Texas since new laws were passed.

You will have to put more down usually with lenders when you buy as investment property and will pay a higher rate of interest. This is of course if you use conventional bank or mortgage type financing. Usually they will allow the seller or another party to finance a second mortgage of 10% or so and you put down 10% and they will loan the other 80%. This is just a general statement as there are numerous programs available where you can even get 100% combined financing. These rates too are higher on average. You may get a rate of 9 to 10% on a 100% deal but I am guess guessing.

From what I can see let me hit a couple topics. Owner Financing of a Primary residence is how 90% of real estate investors get started. The trick is the first house you buy and what the purchase vs. market value is.

When it comes time to pull money out of your primary residence for your first investment property YES the interest rate will be higher than if you lived in it. Risk to the bank always = higher interest.

Buy right, sell smart, dont lease to friends, and always be educating yourself.

Good Luck,

If I do a Contract for Deed where the owner holds the title, will I be able to borrow against the value of the land to get a construction loan? I get equitable title so I should be able to get a construction loan, yes?

Howdy Fearless:

No. The owner could get a loan but not the buyer under a contract for deed. Most contracts are written where the owner can not borrow against the property either.

The banks will also want a first mortgage for a construction loan too and want you to own the land. They will loan the money for the land too in the construction loan if you have a committment for a mortgage.

Hope this helps some.