I have an investment property that I’m getting from hud for 85K and it’s worth around 105-110K. I have worked into the deal 4.2K for closing costs but my mort broker is saying that the lenders will only allow 2.5K to be contributed by the seller for closing costs?? Why is this? Why would it matter to the lender how much I’m getting from the seller?? BTW we’re looking at doing 100% if need be, but could deposit up to 20% (but prefer not to) and I have a 650 middle and my wife has a 700 middle. What’s our options?? I would prefer to not do a HML, since our margin is a little tight. We will focus on a quick flip, but in this area we will probably have to lease option it-possibly for the long haul which is fine depending on the rates we can get…I need some reasonsing here about the 2.5K cap and our options.
Why should it matter if you have the funds to put 20% down? The reason he said 2500 is becuase most investment lenders only allow 3% seller concessions. Usually when you buy a property especially at 100%…there is an extra 3% to add on to that so you really are kind of going 103%. You have found a HUD home, most people buy a home for a round what it is worth, hence the cap on seller contributions. Those costs will be wrapped into your loan. Some places allow 5-6% on investment, but not many. Most are capped at 3% on investment properties.
On owner occupied property they allow 5-6%. Investment is more of a risk so most cap at 3%. It is just their rules, no catch. Each lender is different.
Yes, putting 20% down will eliminate pmi (not all lenders have pmi though), the rate will most likely be better, and it is less risk to the lender. If you can make your numbers work right, I reccommend putting down the minimum and keeping the rest for cash-flow.
On owner occupied property they allow 5-6%. Investment is more of a risk so most cap at 3%. It is just their rules, no catch. Each lender is different.
Yes, putting 20% down will eliminate pmi (not all lenders have pmi though), the rate will most likely be better, and it is less risk to the lender.
In the lending game it is all about risk and if you are financing the only risk the lender is worried about is theirs!
N/O/O mortgages are more apt to default if the borrowers financial situation were to deteriorate. This is why it is hard to find high LTV N/O/O programs. Lender’s want some kind of investment from the borrower/investor.
An investor might fight a little harder to keep an investment if they have made some type of personal investment.
You can still get 100 financing and not have pmi. It would require splitting up the loan into a 1st and 2nd mortgage combo. If you plan to hold for awhile your payment would be much lower.
Doing 1 loan at 100% may require a full doc loan as well as require prepayment penalties.
Seller paid closing cost on noo usually is 2-3%. Each lender that we are signed up with has their own guideline.