Tue, Feb 09, 2010
|
100% LTV NOO LOANS!!!! (Non-Hard Money)
| | Friday, October 31, 2003 @ 08:00 AM EST
|  Printer Friendly Page
 Send this Story to a Friend |
Contributed by: Inactive Account
Inactive Account Properties
Read more archived articles about Credit and Finance
Most real estate books and courses all take about 100% LTV Non Owner Occupied loans. So it is not a surprise that on the message boards you find a lot of messages looking for these programs or questions about them.
First off they do exist! But are you sure that you understand how they work?
But before we get to deep lets get a very important term straight. LTV or Loan To Value, conventional lenders use the lower of purchase price or appraised value to determine LTV.
They are usually two loans one for 80% and a second for 20% of the LTV. This gives you a CLTV (Combined Loan To Value) of 100%.
The first loan will have a lower risk so it has a lower rate. The second loan has a very high risk to the lender so the rate is very high. The “Blended rate” usually works out to a
reasonable rate. Not a low rate but a rate that will compensate the lender for taking the risk. Part of this is off set due to the fact that you will not have PMI.
One of the reasons that investors want these loans is they don’t have a down payment. Well you will still need some cash to get one of these loans. Most limit the seller’s contributions on closing cost to 3% of the loan amount. So you will need to come up with enough cash to cover the cost that exceed 3%.
Most also require 6 months worth of reserves in seasoned cash. This means that you need enough CASH to make 6 months worth of payments. This will usually work out to 5 to 7% of the loan amount. You will have to show where this cash came from. And a cash advance on the credit card is not a good answer.
Good credit is required to get these loans. I used to spend a lot of hours looking for 100% LTV NOO programs for people with lower scores. Any time I found one for FICO’s below 680 the rates made hard money look good. At least hard money requires very little paper work.
Speaking of paper work, be ready to show full documentation. Stated or no ratio on these loans jumps the rate.
Watch for prepayment penalties. It is very common for the lenders to require a prepayment penalty.
You will also need enough income to keep the DTI numbers in line.
The good part is that you get to keep the cash that you have on hand. You do not have to put it into the next deal. If the property will cash flow using this program use the cash flow to build your reserves up to do another 100% loan. Until you max out on the number of 100% loans that you can get.
Hopefully by that time the value of the first few deals is now high enough that you can refinance them at less than 90% LTV. This will lower your interest rate down closer to a market competitive rate increasing your cash flow.
So 100% LTV NOO loans are not easy to get and they are not cheap. But when used correctly they can help you acquire a few properties without using up all of your cash.
Word Cloud:
about cost most part lower rate. months down good loan used have keep amount. programs loans. show 100% (non-hard second they />
the value also prepayment using cash will these lenders ltv. looking this time with money) very lender worth usually money loans!!!! high loans cash. need paper credit enough first risk reserves flow hard require rate
|
|
| |
Average Score: 4.37
Votes: 8
|
|
|
|
|
Logged In members can moderate all comments.
|
|
