I’m running into a brick wall here. What I want to do is buy a house cash, rehab it using my own money, and THEN turn around and put a mortgage on it. (I’m buying to hold.) I’d like a conventional loan (low rate, possibly fixed) and would like to get cash out. So basically, I might buy a junker for $25k, put another $25k in to fix it, and budget $5k for closing costs. That’s $55k. If the home appraises for $100k and the lender will give me 80% LTV, I’d like to get the full $80k loan and thus net about $25 cash ($80k-$55k in). The lender would also have to have no seasoning requirements, obviously.
The problem is that I have 10 mortgages in my name, so FNMA loans won’t work. It looks like my options are:
Use nonconforming lenders. I don’t really want to do this because rates are so high.
Buy via an LLC. From what I understand, this means I’d get commercial loans, not residential. And commercial loans amortize over 20 years, which makes my payment as high as using a nonconforming lender.
Use a construction loan instead of buying cash. This doesn’t allow me to get the extra equity out; i.e. my mortgage would end up being around the $55k I spent instead of the $80k I want.
Roll some of my current 10 mortgages into a blanket commercial loan ahead of time. The problem again here is the 20 year amortization and the fact that none of these properties have enough equity to justify the refi.
What I’m really looking for is a bank that has portfolio loans (not sold to Fannie or Freddie), has no seasoning requirements, will allow cash out, and doesn’t have a cap on the number of mortgages you can own.
Greenpoint has seasoning restrictions for what you’re looking to accomplish. There are several others out there perfect for your goals. Interest rates are much better than nonConforming loans. BTW, most nonConforming lenders have 6-12 month restrictions.
A good mortage consultant will already have these lenders mapped out for their clients.
You never mentioned credit scores.
PS…Rolling loans over into commercial financing will not accomplish a reduction in the “10” loan limit. You will still be required to disclose all 1-4 units with financing.
Thanks for the replies. This is the first time I’ve heard of Alt-A, proving that you learn something new every day. Could someone give me the basic outline of how these loans work and look like, or point me to the info online somewhere? Are these lenders I’d access through a broker?
My credit mid-score hovers around 745 or so. Shame that I didn’t use the conventional lenders before hitting the 10 loan ceiling.
Alt-A lenders offer products that help borrowers with good credit who do not quite fit the prime profile borrower. They offer products that allow borrowers to qualify with higher LTV’s, lack traditional employment or are unable to provide traditional income and/or asset documentation. Some of them like Indymac Bank allow you as the borrower to contact them directly for a loan, and others are wholesale only which means you must use a broker. There are plenty of lenders out there to meet your needs. Hope this helps.
Thanks for all the help. What kinds of LTVs do these lenders loan at, what rates (approximately) are they currently running, and how many points will I have to pay up front?
If you don’t want to get hit on rate keep it at or under 80% LTV.
Lenders fees are right around $700 and if you use a broker you will probably pay about 1 point origination and a flat fee for “broker” or “admin” of about $400-$500.