Im doing my first investment property and going through a mortgage broker. My mid fico score is 785, I have no debt except my mortgage which is $1200, I make about $50000 per year, and I have about $3k in the bank. My broker is getting me 100% financing non owner oc (stated) with the 80% loan at 9.125% and the 20% loan at 13%. This sounds way too high considering my credit score. We tried to do a full doc 100% financing loan but he said the banks want to see more money in the bank so they wont do it. My broker is telling me this is the best he can do and I can take it or leave it. He was supposed to give me the good faith estimate today with the exact numbers including closing costs but he did not send it.
What do you guys think??? Do you know of any financing I can get in less then one week that is better than this???
Joel,
It is true that you need some reserves in the bank to do a full doc loan on investment property.
Fannie Mae’s guidelines say that you need 6 months of your piti on the subject property and 2 months piti on your primary residence to qualify for the full doc loan. They want to see that you can actually cover the payment for 6 months in the event that you loose your job. It is also true that anytime you do 100% cltv (cumulative loan to value) the rate will be much higher. It is a huge risk for an investor to take on a 100% loan because if you have no reserves and the renter does not pay, then they assume you will fall behind.
However…you have a couple of options. If it were me I would try like H to put 10% down for the first property ( even if you have to partner with someone) then you will be able to use the income from the property you are buying to offset your mortgage debt ( they can use 75% of the rents) assuming it is occupied. Then once you close you can turn around and get a 2nd mortgage up to 100% cltv and put your original downpayment back where you got it.
Try to buy something that will appraise higer then what you are paying.
I hope this helps
Thanks for the reply. Im buying the house for 81k as a foreclosure. It was built in 2004 and is in excellent condition. Only needs 1 light fixture, a carpet cleaining and paint which I can do all myself. The market value is 105k, appraised at 102k and I think I can rid of it for 100k within 2 months hopefully. The main problem is I wanted to owner finance it for good cash flow but with those numbers it wont be good enough cash flow. I actually already had a buyer willing to owner finance it but I was going to charge around the same amount that it looks like I will be paying for it now. So now, it looks like I will just have to list it on the market. I can afford the monthly payments on it, and I wont have to pay the 1st payment until Nov 1st. I figure worse case scenario I hold on to it for 3 of 4 months and should still be able to make around 5k on it worse case scenario. I guess I was just expecting better numbers because my credit was good. The reality is I need to have more cash reserves to get those kind of numbers and then I can look into owner financing for good cash flow. Hopefully with the money I make on that, i can start building the cash reserves. I just wanted to make sure I wasnt getting jipped.
Joel,
Do you own a primary home now that you could get a home equity loan on to put in the bank and show as reserves?
Don’t give up…you just need better financing and with credit like that you will find it.
Do you have w2’d employment?
Yes, I do own a primary home however dont have enough equity on it since I just bought it recently. I do have w2’d employment and gave him all the paperwork but he said it wont do me any good for the investment property unless I have reservers. Im not giving up on this one just have to change my game plan on it. The good news I only see myself putting a couple thousand on it for repair at the most and maybe 2 months payment so I can still come out on top. Just not as good as I originally thought.
I had a client in the same position a while back and he told me that he had another bank account with money in it, so I got the latest statement and the deal worked out fine. I did not find out til later that his mom added him to her account to show more reserves. ( a little sneaky in my opinion) but it worked.
Maybe think about partnering with a family member on this first one. Pooling your resourses is a good idea.
Have you talked to one other lender about your situation? Maybe you got a newbi loan officer.
Try a local bank that holds there own paper. Not someone that is going to sell it on the secondary market. They tend to be a little more flexiable.
Those are pretty good rates for 100% on a Non-owner. From the banks perspective this is a high risk deal. You are putting nothing down and you arent even going to live in the property. Its great that you have a good credit score but the bank is assuming ALL the risk for your investment. That doesnt come cheap.
I think its a terrible deal. You need to visit your local banks. They know the area the best, know the market, and like to meet with the buyers. Plus you don’t need to put anything down on these deals. I don’t care what anyone says.
I just bought a REO home from Wells Fargo. I went to a local lender and got an 80% loan based on tax assessed value at prime plus ZERO, with an interest only note for 9 months with 400 bucks in closing costs which they put into the loan for me. You don’t need to jump thru hoops trying to get a HELOC or private money especially with your great credit and DTI. 80% of your appraised value at 102K puts you at 81.6K which is plenty to cover your purchase price. You need to search for a lender that will loan out on appraised value or (ARV) after repair value. You need an 80% loan on this deal. That’s it. With that credit and DTI that should be no problem. I know because I am doing these deals right now! Visit your local banks my man.
I give my mtg. broker the back end of the business when potential buyers come to buy my rehabs or other investment properties. He can’t touch what I’m doing on the purchase end and has told me to keep going that route. My two cents.
From an investment standpoint, this really doesn’t look like a good deal but if you are borrowing 100% of the appraised value, those are good interest rates.
100% financing on an investment property, the rate is going to be a bit high, but that sounds way high. Do you have any other liquid assetts?(401k,pension,stocks etc.) Who are you buying the property form?(the bank, sheriff or the home owner) you could possible get more money out if its from the owner, just need to be a bit creative with the contract. I’ve done deals stated- stated and the rate was acceptable 7.75 on the first and 8.5 on the second. Also done a straight paying pmi. only way to figure it all out is to compare the pmi payment to the second payment. Good Luck!!!
If he’s not keeping it for any length of time, the PMI won’t particularly matter. Also, the last few months the bigger lenders and really cracking down on the “flippers”, so make sure you’re ok there. Some are even adding a penalty if there’s a payoff from a sale of a N/O/O in less than 12 mo’s.