Should I use HML or regular bank lenders for rental property purchase?

I plan to purchase a property for rental purposes. The property will have some equity in it but I want to hold on to it for at least a year or two before selling. Would a hard money lender or a regular bank be ideal for this? I know with a regular bank, they want you to put 10% down and I really would prefer not to have to put that much down if any.


Coventional lenders do offer 100% financing but they’ve made it much harder to qualify for this.

If you can qualify full doc the rate would be something you may be able to consider for holding short term. Reduced doc rates would probably be out of line, unless you’re buying well below market value with strong rents.

In order to get 100% with HML you’ll need to be buying 50-60% below market value. Loans are 6-12 months with rates avg around 14%. Not to hot for rentals.

Putting money down would be advised to cash flow.

What has your mortgage consultant advised you so far?

I agree. If you are going to hold longer than a few months then hard money is going to really erode your profitability. I would purchase with a conventional loan so that your holdings costs will literally be 50% of what they would be on hard money.

Good luck!

If you have seller participation (the seller is willing to take a 2nd), then there are “soft money” alternatives for investors to facilitate 100% financing.

A score >500 will get you a 90 LTV 1st that you can marry a 10% seller 2nd to…

A score < 500 will get you a 70 LTV 1st…30% seller 2nd to…


Scott Miller

Just be careful as a new investor that you are not being lead into a “forgivable” 2nd. This happens when a deal is structured with a higher sales price and the seller “throws” the 2nd way.

In addition to soft money lenders, there are coventional lenders with coventional rates/costs that offer 80% 1st with 20% seller seconds.

What Ben is saying is forgivable or silent 2nds are forms of mortgage fraud—don’t be a party to it…


Scott Miller

I understand…thanks guys!

I’m new so forgive the ignorance…

What is a “forgivable or silent 2nd” mortgage, and why would anyone use or try to use one?


See Ben’s explanation for forgivable 2nd above—a silent 2nd a “secret” agreement between the buyer and seller—the seller agrees to take back financing and not go on deed (until after closing the loan)—both parties agree not to tell the 1st lien holder about the arrangement—there is the misrepresentation; the fraud…

Does that clarify this for you?


Scott Miller

Just to expand a little on the silent seller second or forgivable second.

Basically if the property is listed at 200k, you end up coming to an agreement of 250k. You get a bank loan for the 80% of 250k and you get a seller second of $50k. The seller rips up the 50k loan after closing and now you’ve done 100% financing instead of the 80% the bank thinks. That’s where the fraud comes into play. Of course to combat this, banks do get appraisals and if the property is listed for 200k and the comps are 200k, they’re not going to buy the 250k sale price anyway. This is more doable if the actual sale price was 160k and you ended up throwing away the seller 40k 2nd.

Of course the legal way to do this is to get a real seller second. Usually a simple interest type loan at a good interest rate, say 6-7%. Most second mortgages are at least 8-9% or more, plus there’s closing costs which you wouldn’t have with a seller 2nd. It’s a buyer’s market in some areas so some sellers may be more willing to consider this in today’s market.

So what score is it, 600 or 620?

You say 620 on this reply but 600 on another one just several minutes ago.