I’ve obtained three unsecure line of credit thus far totaling $109,000. I’m hoping to obtain another $100k but I’m not sure if I’ll get it since the guidelines are different from the other three I’ve received.
The two I’ve received were $50k a piece and I got them through a local mortgage broker. I dont think they have anything else to offer and I was wondering if there was someone else out there that would offer the same thing. My credit score is in the low 700s and I’ve been applying for these LOC with a stated income.
the line of credits are for working capital.
We’ve almost maxed our one line due to downpayment and other payments.
I need another one to obtain some land.
I’m a little sketchy on the terms but I know both of them are prime + 1.
One has a yearly review while the other is review every 3 years.
So you have already maxed out one 50k LOC on down payment and such? How much was the purchase price? more than 500k I hope. Even the most basic conventional investment loans only require 10% down.
With some creative investing know-how found in this forum a 50k LOC should get ya about 5 rental houses or allow you to even rehab 2 houses at the same time, concurrently.
What are your investment strategies or goals rather.
Well, a chunk of it was for closing cost for one of our triplex. That alone was $13,000 from a hard money lender. This triplex also set us back another couple of grand because we’re in the process of evicting the tenant and until he’s out, we’re paying on the mortgage. This particular property was purchased for $50k, and it’s worth $126k after it’s repair.
We also spent money on appraisals and down payment for another house we bought. What conventional investment loans are you referring to?
I admit that $50k goes a long way, and yes we have three houses in our portfolio just on the one LOC. Our second one will be used to fix them up, while the third one I’m trying to secure will be used to obtain properties where we can pay cash.
The conventional loans I am referring to are the kind like my credit union offers… Here is what their website says about them:
Investment Property Cash out allowed
Investment Property Loan :
Can borrow up to 85% of the value of the property to payoff 1st mortgages, 2nd mortgages, consolidate bills or purchase other property.
Borrower must have excellent credit
Term will only be for 120, 180, 240 or 360 months
LTV (Loan to Value) 85%
15 year note
6.250% APR
10% Down investment fee required
30 year note
6.500% APR
10% Down investment fee required
Rates are based on an $80,000 loan amount, lower loan amounts may have a higher rate and higher amounts may have a LOWER Rate. Please call for ARMs and No Doc Rates.
The above rates DO NOT have discount points tied to them. There is a 1% origination fee.
Closing costs are typically about $2000 - $4000, Title Insurance is required. If you escrow, the escrow account must be reestablished with the new loan.
I also have a question about you gathering more LOCs… doesn’t that lower you credit score or some other adverse effect to getting the actual mortgages for the homes? I guess they look at the fact that you could essentially rack up all those lines of credit to the hilt. I could easily get unsecured loans at 10% for up to $8k-$12K or I could get additional credit cards at about 9%, but did not want to continue in that direction for fear I may end up lower my credit score which I have worked at getting up to 655.
Simply having open lines or any available credit will not have an adverse effect on your credit. This misconception started because occasionally a lender will ask an applicant to close accounts if they feel the customer has what they consider a risky amount of available credit, but this doesn’t happen very often anymore.
The ratio of balance to available credit DOES have an effect (sometime significant) on credit score. This only applies to revolving credit (be it credit cards, line of credit, etc.). If your balance is less than 50% at the tradeline level you get bonus points - if you are over 50% it is progressivelly damaging to your score. This does not mean that you can not have a solid mid 600 score and be maxed out, but that same person score would approach or exceed 700 if each revolving tradeline was 49% of available.
For these reasons it is actually better (from a score perpective) to keep revolving accounts with a zero balance open rather than close them. You also get points for the age of accounts - that Sears card from 1983 without balance - leave it open if it has no annual fee
Conventional generally means good credit and more often then not used to refer to ‘conforming’ fannie/freddie programs, which allow a max of 90% ltv on 2 - 4 unit investment props and with some shopping rates from mid 5’s to low 6 on a 30 year fixed. Better rates can be obtained (ARMs, etc), but you have to make sure the program meets your needs/risk tolerance
Thanks mtgpro - thats good info. I’ve always believed open lines of credit hurt one’s score so i’ve tried to keep mine to a minimum. Sounds like I’d do better haiving some open and let them age without keeping a balance on them.