Are we, as investors, given any liberties in the percentage we must put down on Single Family Homes purchased to rent out?
While looking for a bank for my first project, I found one bank that wanted 20% down of everything; purchase price, rehab costs, etc. Then, I was refered to another bank that only wanted 20% down of the purhcase price of the property, which saved me almost $20K. One of the main rules is leverage, right?
Do any of you know of banks that do 10% or less down for investors? How do people buy 5 and 6 houses in a year…are they just loaded and put down the 20% each time? I actually ended up needing zero down on the first project, but am trying to figure out how to get one right after the other.
I don’t put any thing down. At 20% down you run out of money before you run out of deals. My bank will loan me 90% of the after fix up value of the house. My typical deal is bought for about $80k and valued at about $110k. I put down $500 earnest money, $250 inspection $450 appraisal. I give my loan broker 2% as a deposit (just in case I buy the house and don’t fix it up) At that point I close with about $2700 in the house. I then start fixing up the house. I engage a contractor for $4,000 to fixed up the house. I then have $6700 in the house. After the house is fixed up I get a draw from the mortgage company for the fix up and I get $4000 of the money back and after I do the final close I get the $2700 deposit back. I end up with a house in perfect condition with $700 cash in the house that I actually paid $86,700 in the house that is appraised at $100,000. After I have all my cash back out of the house I do it again.
You need to ask a bank that does real estate investing loans. They know what products real estate investors need. I always advise you check out the mortgage brokers that advertise in the local real estate investors club meetings. Talk to the mortgage brokers that make speeches at the club or serve on the expert panels about real estate investing etc. These are the guys that are in your business.
You need a good mortgage broker. There is no reason that you can’t get 100% financing, unless your credit is poor.
With the subprime shakedown - a person will need at least 700-720 credit score for 100% financing on stated income loans. That’s what my broker told me a couple weeks ago. Could be different if you do full doc.
Hard money loans don’t rely as much on your credit score, but you will likely pay points.
100% investor financing is available to those with a mid FICO of 660 (going FULL DOC) or 720 (going SIVA), 50 DTI, 6 months reserves, etc., for the funding of 1-4 units, PUDs, Condos and modular housing.
A 100 LTV-1 loan without MI is offered for those that meet the above qualifications (and the proceeds from a cash out can be used towards reserves).
As mentioned, there are several lenders that offer 100% financing.
In addition to full doc and stated income this can also be done as “no ratio”. Meaning that the 50% dti (debt to income) ratio wont even play a factor. This is important for those that would be overstating their income to qualify (which could be fraud).
One other additional factor to be mentioned is the lenders’ guidelines on negative cash flow. Even if a lenders doesnt calculate debt to income ratios, they will still want to know if the subject property is generating a negative cash flow. They will look at the full payment of your property compared to the monthly rents. Usually determined by the appraiser’s rental analyis including expesnes and vacancy factor. A safe way to look at this is by using 75% of the rental income. So if the property is generating a negative cash flow, 12 months of reserves are required. 1 month of reserves = 1 month of piti (principal/interest/taxes/insurance). These funds are what is left over in liquid assets after down payment and closing costs are made; must have been in your account for at least 2 months. A few lenders wont even touch it with a negative cash flow.
These are the types of loans that you definitely want a mortgage consultant that specializes in investment loans involved on.
Have you talked with a local branch of what used to be Hibernia Mortgage? I had great luck with them…my guy was in Shreveport. I probably have his contact info somewhere…let me know if you want it and see if he can help you. I could get 100% (but always took the 80%).
And thanks to all who have replied, it gives me hope. I am obviously just not finding the right people yet. Amazing to me, I would think people would be fighting over my business. I have 3 people ready to invest with me, contractors lined up, properties in sight…no one to deal with. Unreal.