Hey all,
Is it possible toget a mortgage on a SFH that is less then 30K? Is there a specific loan company that is more willing to loan for something like this? Is the issue that the broker will not make a good commission because its percentage based?
I plan on buying SFHs to rent out.
Thanks,
Herschel
It’s not a question of the commission (although you can expect the points to be higher than a larger loan) as much as a question of minimum loan requirements. For example, my company has a 25k minimum first mortgage loan amount and 10k second mortgage minimum.
As far as 100% financing for a loan this small…you won’t find it. you will need to put at least 10% down (Unless there is a niche lender out ther) if you want to go with a traditional lender. HML could help you out possibly with 100% financing, but it could be costly. Keep in mind that 20% on a 25k loan is only 6k (plus assosiated fees). This would put the value of the home at about $31,250.
Let me know if I can help you out with anything else.
Mark,
It seems that some of the math you did is incorrect…or you were trying to say something that I didnt quite understand. 20% of 25K is 5K. Also, why would the value of the home go up? Shouldnt it still be worth 25K regardless of how much the downpayment is?
Also, heres another idea that I have (took it from a friend who has done it, but would like to hear other peoples opinion):
If I bought the house with a credit card check and then went to a bank and took out a line of equity on the house to pay off the credit card loan. I think she mentioned that this wont cause any points. What exactly are points and how does that work?
Basically, I am trying to be creative and get 100% financing with the ability to purchase more then one property.
Keep the ideas coming!!!
Herschel
What Are Points?
In refinancing, a mortgage company usually offers a range of interest rates at different amounts of points. A point equals one percent of the loan amount. For example, three points on a $100,000 mortgage loan would add $3,000 to the refinancing charges.
Analyzing various interest rates and associated points may save you money. As a rule of thumb, each point adds about one-eighth to one-quarter of one percent to the interest rate the mortgage company is offering.
Generally, the lower the interest rate on the loan, the more points the lending institution will charge. Some companies offer refinancing with no points, but generally charge higher interest rates.
To decide what combination of rate and points is best for you, balance the amount you can pay up front with the amount you can pay monthly. The less time that you keep the loan, the more expensive points become. If you plan to stay in your house for a long time, then it may be worthwhile to pay additional points to obtain a lower interest rate.
Some companies may offer to finance the points so that you do not have to pay them up front. This means that the points will be added to your loan balance, and you will pay a finance charge on them. Although this may enable you to get the financing, it also will increase the amount of your monthly payments.
Mark is correct in his statement regarding the difficulty in obtaining financing for smaller loan amounts. It is has become increasingly difficult to find lenders that will accept loans under 30k. .
Mark,
Thanks for the explanation of the points system. One more question: Does having more points affect your credit ratings? Or its just a system that works with the interest rates?
Also, are there points involved with taking a home equity loan?
Herschel
Has absolutely nothing to do with your credit score. Credit score is based entirely off of your financial commitments(i.e.; car note, credit cards, student loans, etc.) and ability or way that you pay them, % of available credit, etc.
Hershel
The issue should NEVER be your agent/broker (top) it is their fiduciary duty to work in your favor as they represent you! They must present any offer you make to seller or sellers broker regardless of their commission amount. If you are working with the sellers (listing) agent, then I suggest you find an agent to represent you. Generally the commission is paid by seller and split between agents, therefore it should not cost you commission fees to have someone working FOR you. Realtors must abide by the code of ethics laws. Unwillingness of presenting an offer you wish to make due to the agent/brokers commission amount is a major violation. Any decent agent will advise in your best interest of the offer you wish to make…as long as they represent YOU!
Carolann
Carolann,
When I talk about a broker I am refering to a mortgage broker not a RE Broker…I think that may change things.
Herschel
Herschel
You mentioned broker commission and I assumed RE. Apologies to you. However, even a mortage broker has fiduciary duties to work in their clients best interest regardless of commission. That is if their in business for more than just a quick buck. I work with several m. brokers of which one made about a nickel an hour on one deal of mine and an outragious amount on another deal I brought her. Had she not proven herself worthy of the first deal regardless of pay, I would have taken the next one I knew she was able to pull off else where.
Carolann
Using a credit card to purchase properties will rapidly increase utilization, depending on the strength of the rest of your credit it could really put a damper on your scores, so when you were to obtain the home equity loan/line of credit you might not be able to get those favorable terms. I like your thinking with using another form of credit to purchase the home, however I’d look into short term personal loans from a bank which report as installment loans instead of revolving.