Which ways can I finance?

I would like to get into real estate, I have formed my company but cannot get financing in the company name because my company is too new. I’ve been looking for a house for my mom for a while now in addition to other homes that could be a possible investment. After months of looking now I found two houses, one that could be a good property for my mom to live in and another that I think could be a good “fix and sell”.

The one for my mom is listed at $55000, they say alot of the work is already done. Comps should be at around 80 or so in the area. I’m not trying to make a profit off this one, I just want a decent house in a decent area for my mom.

The other property is a hud home listed at 85500, but I’m going to try to put the power of the formula to work. Comps would put that house at approx. 115,000 and it hopefully only needs some fresh paint, carpet (or a good cleaning), and other small items. If the repairs don’t include much more than that, I think it would be a good candidate to flip. I know it’s not making a million dollars, but I think even a 7000 profit isn’t bad (considering I have to spend 15000 on repairs which shouldn’t be anywhere near that) and then figure in the realtor fees.

Anyway, long story short…I only have about 7,000 saved up. I’ve been calling banks and it looks like I have to have 10% down. One house at 55000 and another at 85500 or less… You do the math… Obviously I don’t even have the 10% down to purchase both.

I’d like to know what my options are? I don’t know any investors that could put up the money for the down payment. I thought about putting the down payment on the hud home (a no interest till 2009) credit card. Would this make sense or is it stupid?

I have stellar credit, but I just don’t know how to come up with the money for both? Am I taking too much risk by trying to purchase two homes at once?

I don’t know where you think you are going to make money on that HUD house. By the time you get done with closing costs, realtor fees, repairs, holding costs, etc all of your profit will be gone. Rehabbing you want to be buying at 70% of ARV - repairs.

$115,000 ARV x .70 = $80,500
$80,500 - 15,000 = $65,500

Can you mom not qualify for the house on her own? If not you could try an FHA loan which will allow you to co-sign for her. As for the HUD home Rich is correct. If you have to carry the home for a few months because we are going into the slow season for real estate plus pay closing costs it is going to eat up your profit quickly. You are not getting ahead of yourself by buying two homes because one of them will be owner occupied. You just need to keep your eye out for better deals.

I forgot to even think about the season, good point Chris. We are going into a slow season (winter) in a slow market, that’s a potent mix.

My mom lost her job approx. 4 years ago and lives basically on Social Security and a part time income that isn’t guaranteed. In addition to that, she doesn’t want to get a loan because she thinks it’s a burden if she passes away and I am left to deal with how to let go of the house, etc. (I know, I know, but she’s stubborn). So I figure it’s a way for me to build equity even though I’m not making a profit.

As for the other house I figured it would work as a learning experience and even if I carried the house for 5 months I could still make at least 5000 on it. I’m trying to find a property that doesn’t require a major rehab for my first project. I think that it would be too overwhelming to take on a first project that requires a major gut and rebuild. I thought it would be best to look for something with minor needs: paint, carpet, cosmetics really…

Thanks for the advice, I guess I will continue the quest for a good candidate.

I don’t know if I can say this, but I spoke to Quicken Loans today and they seem to have the best rates, etc. for me so far with an investment rate. Has anyone ever worked with an online lender or know anything about Quicken Loans? I’m a bit leary because I’ve never worked with an e-lender and I just want to make sure they really do work just like walking into your local bank or major lender.

What kind of rates was quicken loans offering you? I would suggest speaking to someone who works with investors on a regular basis.

6.875 which I think is pretty good…

Yes, that is a good interest rate. What you need to get from them is a truth-in-lending statement. Then compare that with other lenders at 6.875%. Because what they may have not mentioned is if that rate comes with points or not. You would hate to get to closing and have to bring a large amount of cash because you are spending three points to buy that rate.

The points and junk fees should be in that truth in lending statement.

The lender legally needs to furnish the TIL in 3 days right?

The rate does not include points. If I finance less than 50,000 that’s when the points come into play. The one difference I will note with them (don’t know whether this should be considered good or bad) is that they require a $350 good faith deposit which is refunded at closing. Not sure how I feel about that… Anyone else ever heard of submitting a good faith deposit?


That is 3 days from when you make application. Most lenders can print you a preliminary TIL before that if someone asks. You just have to make sure that the fees you put on the GFE are correct. Of course I tell the borrower that the TIL can change once we have title company fees. But my fees are set in stone and don’t change unless the borrower wants to buy down the rate.


That may cover the cost of your appraisal in case you opt out of closing with them. Many lenders collect for the appraisal at time of application. I just make my borrowers pay at the door or mail a check to the appraiser before they release it to me. I hate taking money from people before any service is completed.

Thanks for the info Christopher, it makes me feel better knowing that this is not a totally uncommon practice. I’ve just never run into it when financing for my own personal property in the past. BTW, I am just now realizing you are a mortgage consultant. :smile

I will also do more research on the TIL statement.

It should be noted that although a GFE & TIL are required (by law) no later then 3 days after receipt of application—there is no law requiring a lender/broker/banker to accurately disclose fees.

I’ve spoken to clients with mixed results from Quicken—make sure you compare before you take the plunge…


Scott Miller

Thanks for the advice Scott. As it turns out both properties were duds today. One had property taxes of 350 a month (yes a month) and the other needed waaay more work than they led on to in the phone conversation. And so the search continues…


350 a month? I wish. Here in Texas that is on the low end.

$350 a month here isn’t too bad depending on the property.

115,000 dollar home with .2 acres??? That’s outrageous, at least here in Indy it is. Our home is on a half acre, house is worth a lot more, and our taxes without exemptions only ran 200/month. Geez, no wonder people can’t afford to own in other parts of the country if you have to pay 500,000 for a sardine can house and then an extra 300 or more on top of that per month for property taxes. I guess we shouldn’t complain here in Indy.

Here in texas on a 500K home you are paying close to $1000.00 per month. But we do not have a state income tax so it offsets… sort of.