Question? for brokers and Loan Officers

If I had a property I am buying for 65% ARV, would I still need a down payment? Would it be possible to get loan at 75-80% even if the negotiated price was 65% or less to get cash out to do rehab?

Thanks for your replies in advance!

When you are doing a purchase it is always 100% of the set purchase price.

Unless the appraisal comes in less then the sales price, then the lender will use appraised value as the basis for calculating LTV. But if you are buying a property that appraises for less than what you are paying, you may want to consider a different hobby!

I am glad that you were watching my back on that one rbaxter

If your appraisal comes in lower, then it is time to “cut bait and run”

While I agree with that basic precept, what about the exception to that rule?

Lets say I have a borrower in southern CA {where the market is unique in relation to the rest of the US}

Hes buying a property for 100k more than appraised value, BUT the property is an sfr on a multi unit lot, that he can build up to 7 condos on.

Now since condos in this area average 500k easily, and his overall costs are between 1.7-2.2 mil, couldnt this scenario warrant paying more for a property than present appraisal. Its an obsolesent structure thats being purchased for the land.

Just a hypothetical, thats all ;D

Everything seems to be unique in CA. ::slight_smile:

The investment potential is obviously outstanding. However, you will not find a conforming lender who will do this. Conforming Lender’s are generally not big risk takers! :o

Maybe the HML folks may be interested. They will only loan up to a certain LTV which may be enough to get things started.

HML’s use the ARV to base funding on, for the 1st several deals you want to keep below the 65% ARV. For the first several deals to establish a relationship with the HML (This includes purchase and repair)

ex… purchase for 30K needs 20K ARV is 100 K this is more than doable because is below 65% ARV.