The folks you spoke with are talking Freddie Mac pre-automation. With an LP approval (FreddieMac automated underwriting)or a DU/DO (FannieMae) you can get up to 90% LTV investor for single family (sometimes duplex as well)units. 70% to 80% LTV for tri- and four-plex’s.
100% LTV NOO with a 75% first and 25% second (this is NOT a Fannie/Freddie product). Anything with a lower LTV is possible.
About your credit, it must be good enough period. The problem is that every single mortgage program has different underwriting criteria… therefore some programs will allow a 620 score… and some won’t touch you if you don’t have a 720 or higher score.
One of the things I cannot emphasize enough is get a basic understanding of financing. And every, a word worth repeating EVERY non-conforming lender has their own criteria. And will sometimes bend their own rules. Therefore, any deal is theoretically possible… but face it, there are some deals in reality that flat out cannot be done. But you don’t know what they are. Easily 80 to 90% of the ones that some lazy, vanilla deal only company rep. says cannot be done are cake-walks if you have the right sources.
My sad story is when I was 24 I worked for the Post Office. I went into a small local bank and said I wanted to buy a house. The VIP told me that $3000 down was not enough to buy a house. That until I saved 20% down (for an owner occ. in 1980 when the average price of a house in my area was about 50k) I’d never own. The man actually sneered at me. It wasn’t until I went into the money business as a salesman that I learned how badly I’d been mislead. For 10 years I believed that hoser and rented when I could have owned.
The moral I’m hoping to convey is don’t take no for an answer. If it is one of those 1 out of 10 deals that cannot be done you’ll at least get a great education while knocking on doors. All you need is one yes to make your day. I had one hughly non-vanilla deal that I must have received over 70 no’s on before I got a yes. From that property I’ve received over $1,500 positive cash flow per month for years.
Find a good source.
Wow. I just reread what I’ve written. Somebody get me off this soapbox.
Let’s say a seller has an asking price of 100K for his property and I put an offer in for 90k. He accepts. The bank says they will only loan up to 90% (of the selling price right?) which would equate to 81k. Therefore, the extra 10% or 9k would have to come from somewhere else. Could we (the seller and I) tell the bank the selling price was 100k thereby getting a loan from them for 90k which in reality would be 100% financing because the actual selling price was 90k? Am I missing something or over-simplifying or both? My gut feeling tells me you can’t do this but I can’t figure out why.
Also, has anyone really been able to purchase a property for 100% financing from one lender?
Re: Will this fly with the bank? - Posted by Skywalker
Posted by Skywalker on February 17, 2001 at 11:22:12:
the majority of banks will want to see proof that the 10% came from your own personal savings when doing conventional mortgages.
I am in the process of closing my first deal. Take a look at this:
I was able to secure a 3% down 30 yr mortgage with my good credit score. My lender allows the seller to contribute up to 3% of the selling price in closing costs. The house was listed for $90,000. I offered $87,000 and the seller accepted. I turned around and told the seller I would pay her $89,700 for the house if she would contribute $2700 in closing costs at the close. She agreed. The deal still nets out to $87,000, and almost all of my closing costs are paid for by the seller while raising my payment about $11 amonth. The 3% down payment will come out of my savings account. Immediately after close I will write a check from my personal line of credit to “reimburse” my saving account leaving me with the same cash position that I started with. Virtually this is a zero down deal.
I spoke to three local (smaller) banks yesterday about the mortgage programs they have available. Everyone of them says they follow the Freddie MAC guidelines which requires investors (or, NOO) to put down at least 25%. I think this is very high. I also spoke to a couple of local brokers and they said they could get me into a 5% down program as long as my credit was good enough. The interest rates may be higher with the 5% but who cares. As long as I can get into the deal with as little money out of my pocket as possible and the positive cash flow per month can cover the higher interest rates. I think it’s better. Unless, of course, I’ve missed something. Which… could be very possible.
Re: Will this fly with the bank? - Posted by Skywalker
Posted by Skywalker on February 17, 2001 at 17:09:01:
Through good credit and a good relationship with the bank I was able to obtain an open line of credit for $10,000 @ 9.5%. I wrote a check against the line of credit for the 3% down (roughly $2700). I pay 2% of the balance per month or $80. After the debt service on the mortgage plus the $80 per month and Operating Expenses I come out with a positive CF of $200.
That sounds like a pretty good deal. Question though - since you wrote a check for the 3% down for your side of the cost of the deal, you, in effect, obtained a second mortgage through your line of credit, right?
Either way, congratulations on your first deal!! I can’t wait for mine to come. I do have some pretty good leads though. Hopefully, it won’t be too long.