OfflineI was wondering if the DG community could help me with some ideas and options I may have with coming up with financing for some rental properties I would like to buy (at 45% FMV, calculated from comps, prices ranging from 46k-60k, with rent potential of $1200-$1600/month, in the Baltimore, MD area). This is mostly a feasibility run to see if this could be an option for me at this point.
So my situation is that my mortgage broker told me that I would not be able to get a conventional 20% down commercial/investor loan due to my income/debt ratio. The option she gave me was to buy the home as a primary residence, at which point I would qualify for FHA loan status (or something along those lines), and put down 5%. I would have to have the home as my "primary residence" for a few months before I would be able to rent it out, but I think this starts falling into "loan fraud" territory.
My other option from my understanding would be hard money lenders, but would they be willing to finance 100% (im sure this 100% finance question has been asked 100000 times already, so I'm sorry for the repetition)? And if so, my worry was my ability to refinance in order to pay back the loan, since again, my broker said I would run into issues because of my income/debt ratios (lots of student loans). I've tried the friends and family loan route, but to no avail.
Any options or ideas for my situation would be greatly appreciated, and if you know of any lenders that may be able to help me, please let me know.
Thank you everyone!
Vince
It is surprising that this loan officer is steering you into lying about owner occupied. They are looking closely at this stuff now.
If you legitimately plan to live there, go ahead and claim owner occupied. If you don't, it is not worth lying.
You are also right that finding 100% HM financing will be very tough. Some will say they do it but not really. They might charge you some upfront fees before you find out they are not for real.
And if this is a buy and hold, you will have difficulty refi'ing out of the HML.
You can ask the bank what their requirements are to refi out of the HML. It is easier if you don't need a cash out refi.
My suggestions are to have a co-borrower to get your DTI ratios down. JV with someone. Or look at this property as a flip instead of a buy and hold.
Buy and Hold strategy takes cash and credit. If you don't have alot of either yet, build it up with some flips.
Nationwide Transactional Lending at 1.5 points flat fee.
Chicago-area Hard Money Lending.
www.NorthSideFunding.com
and ask them if you can get a % of the house in exchange for the finders fee
See if they would let you property manage the home(s) and get a fee for those as well so you at least know your investment is taken care of
Additionally over time they'll learn to trust you and can finance any deals you bring to them
Thanks so much for the tips! I'm going to start looking for some partners in my area to see if I can move ahead with this. One more curiosity I had, let's say I can afford to buy the home cash, so I have no outstanding loans. Would it be easier in that scenario to refinance the home through a HELOC or even a cash-out? Would lenders be as strict with debt/income ratios in this case?
Thanks again for the help.
Vince
Depends on whether this is your primary residence. If it is, a HELOC is possible. Cash out refis are very tough especially in the first 6 months of ownership and yes, they will look at dti.
It is a weird quirk of the mortgage market right now that people who can afford to pay cash cannot get a conventional loan. It has happened to me.
Nationwide Transactional Lending at 1.5 points flat fee.
Chicago-area Hard Money Lending.
www.NorthSideFunding.com