loan - Posted by Henry from Willits, CA

Posted by Sarah on June 21, 2001 at 17:33:36:


Sounds like you know more what you are talking about than alot of the people I’ve talked to. Here’s my delimma (hope you can help). I have not gotten my feet wet yet with my first property. Most places say I can’t get the loan, even with my good credit, unless I live in the property (that’s if I want 100% financing, which is what I must do). The problem is living in the property. Many properties will have a positive cash flow, unless I live in the property, then the property becomes a negative cash flow because I’m loosing out on that extra rental unit. What programs are out there you know of? What can I do?


loan - Posted by Henry from Willits, CA

Posted by Henry from Willits, CA on June 19, 2001 at 09:16:11:

Hi, Ed, we haven’t talked for awhile. Hope you’re well.
Ed, I’m involved in a two-unit deal, house 2br/1ba, detached apt over garage 1-2 br, 1ba. Large lot, ok location. $120k. Needs work, of course. We are in the inspection period, haven’t heard on the p&f yet, know it’ll be somewhat up there, hope for price reduction, but you never know.
I am approved through a local mortgage company for a loan @ 7.5% with 2.5 points, 20% down. I have an excellent (for now) home equity loc @ 6.3% var. (Wells Fargo tied to Jumbo CD). I was hoping for a lower rate and much lower points. My realtor says it’s because the property is income property.
Is this a reasonable deal loan-wise. Cash flow-wise it’s ok, I think I can make it work, rents presently raiseable. My realtor thinks the points are high, but it’s “only” a thou and a half or so more. Of course I know cash flow is critical, and $50/mo is important. I am also told that if I search for better financing on this deal, I can hurt my credit rating, which is excellent.
Ed, and other, what’s you take on this? I’d appreciate feedback.

Re: loan - Posted by Zidzi

Posted by Zidzi on June 20, 2001 at 23:05:48:

Just out of curiosity, why does your lender want 20% down when there are so many programs out there even for investors NOO upto 95%. Do you really want to tie up liquid cash which you could use for a deal that may come out of the blue and be too good to pass up?
Indeed,with creative structuring you can now easily get 100% financing including rehab costs. ( I met a great contact at our REI club this week). If you need some info for your next deal feel free to get in touch with me.
Best of Luck with this one.

Re: loan - Posted by Ed Garcia

Posted by Ed Garcia on June 19, 2001 at 09:57:28:


The person who told you that if you search for better financing on this deal you could hurt your credit rating, is more than likely your mortgage broker. There is a half-truth to that. The reason you could hurt your credit rating is because you will lose points on inquiries. However, the way to circumvent that is to have a copy of a current credit report with the credit scores on it to show other brokers.

Inform them that they are not to run a credit report on you unless you authorize it, but that they can borrow a copy of your copy in order to underwrite the loan. After you agree on the loan cost then they may run their own report.

Henry, there is nothing wrong with your deal, maybe you could shave a1/2 a point but other than that, it’s a fair deal.

Congratulations on your new acquisition,

Ed Garcia

Re: loan - Posted by Henry

Posted by Henry on June 21, 2001 at 24:10:53:

Thanks for your interest and advise. One of the biggest reasons is my relative lack of experience. My agent set me up with a local mortgage co. Small town, you know. Anyhow, my 20% is coming from a 6.3% var. home equity line of credit. Little cash is coming out of my own pocket.
Please tell me what NOO and REI stands for. I’ve been investing for about 8 months now, this is (probably: I’ll let you know when it closes!) my second income property. I’ve been making offers, leaving deals behind that don’t seem like they’ll work. I feel pretty savvy/cautious, hopefully not strutty/stupid. Done that too many times already. Financing is an area, esp creative finance, that is still a universe ahead of me. The 1st property was an owner carry slam dunk. This one I’m jumping hoops and learning this process.
And yes, I’d love to learn more, from you if you are so inclined. Henry
p.s I used the word “strutty” because I was censored when I used a word starting with “co”, followed by “c”, and “ky”. Ooh, sensitive, are we?

Thanks Ed! NT - Posted by Henry

Posted by Henry on June 19, 2001 at 23:58:59:

Re: loan - Posted by Les Gee

Posted by Les Gee on June 21, 2001 at 03:24:57:

Nothing wrong with 20% down. You don’t have the added cost of the PMI and add ons for higher rates and fees.
By you doing it in the equity line, that is perfect.

Re: loan - Posted by Zidzi

Posted by Zidzi on June 21, 2001 at 24:32:18:

Hi Henry
I certainly would love to help. However,it is almost 2a.m. and I fear my brain has already preceeded me to noddyland I will respond more fully tomorrow.

In the meantime, REI stands for Real Estate Investment Club. Find out where the one in you local area meets and the benefits of joining. Ours is great for networking, mentoring and finding deals. This site here will help you locate your REI.

NOO: Non-owner occupier.

FMV: Fair market Value
Let’s find a solution for you quickly partly because once you can package a difficult deal, it gets easier.
Stand tall and reach for the stars.