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Buying With Cash, Then Financing |
woland
7 Posts
Member Since: 07/20/2005
Greenville, SC
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Posted: 12:16 on 01-22-2008
Hello,
I am new to all this and i have the following question: I plan to buy SFHs in foreclosure with cash, rehub the houses (again using my own money) then take a mortgage based on ARV and get most of the cash I put in back. Could someone please tell what my financing options are?
Thank you,
JP
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joblo
70 Posts
Member Since: 05/08/2007
Hillsboro, OR
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Posted: 15:36 on 01-22-2008
Well considering you will own the home outright, and the repairs have already been made, then your financing will depend on the LTV, your credit, and your income. Also, some lenders will require the title to be seasoned in order to refinance, but some do not. But if you have good credit, and documentable income and assets, and the deal is solid, then you should be able to get a great N/O/O loan. I am assuming this will be a rental.
You are at an advantage by having enough assets or available credit to be able to buy with cash.
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woland
7 Posts
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Greenville, SC
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Posted: 17:00 on 01-22-2008
Thank you! yes it will most likely be a rental.
I am working with a friend and here is what we were able to get so far:
75% LTV,
3% origination fees
very high credit score
7.5% interest
is this a good deal, can we do much better?
Thanks!
JP
[ Edited by woland on Date 01/22/2008 ]
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tbird56
165 Posts
Member Since: 08/29/2006
Coppell, TX
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Posted: 17:43 on 01-22-2008
JP, this is my favorite way of financing. Once you have the first one paid for, you can buy almost unlimited properties with 100% financing, no money down, as your loan for the permanent financial will be based on the appraisal, not your actual purchase price.
No, there is no seasoning requirement. There would be if you were financing the purchase from someone else. but since it's your own property you own free and clear, no problem.
The only thing I don't like is that 3% origination fee. However, if you bought it right and plan on keeping it a long time, it's not too significant.
BTW, why go thru all the trouble and headaches of rehabbing when in today's market you can buy REOs and make just as much without the hassle? Don't watch too many of those Flip This House type shows on TV.
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woland
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Greenville, SC
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Posted: 18:05 on 01-22-2008
so, tbird56, or anyone else, please, do you think the originations fee of 3% is a bit high - this is on top of the other non junk fees that might be needed (attorney etc)? in my mind it is not how much we are making on the deal overall, but rather what is the best option available given the current market conditions?
thank you again
JP
ps will def check out REOs
[ Edited by woland on Date 01/22/2008 ]
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edmeyer
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Member Since: 09/18/2003
Morgan Hill, CA
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Posted: 18:54 on 01-22-2008
I have just begun doing what you are about to do. Last year I bought a house using my credit card because I got less that 1% interest for 3 months. Did rehab out of pocket and am expecting my re-fi to be approved within a week or so. I am getting the loan through my loan broker. My big criterion is the number of loans that this lender will do. A month ago they would do up to 19, but I am told now that they will only do 5. I should have a little money to pocket after the smoke clears.
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ypochris
2200 Posts
Member Since: 03/22/2006
Lansing, MI
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Posted: 19:24 on 01-22-2008
I think the percentage that is reasonable as an origination fee has a lot to do with the size of the mortgage. For a small loan 3% is not unreasonable, but for $100K it is way high.
Investor loan with good credit and substantial income/assets- last week I was offered 7%. Another broker thought that was too high, told me she could get me a HELOC for less. Rates dropped .75% today. I will know more tomorrow when I will close a deal and see what the current rate is.
Chris
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woland
7 Posts
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Greenville, SC
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Posted: 13:36 on 01-23-2008
Thank you very much for your input. As I will continue my research I will post the loan terms I see in the market here, please, do the same if possible. I suppose posting a rate will be difficult in the next few weeks with all the turmoil going on.
Thank you,
JP
ps what is a reasonable origination fee for a NOO 100K investor refinance loan? 1%? $1000?
[ Edited by woland on Date 01/23/2008 ]
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ypochris
2200 Posts
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Lansing, MI
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Posted: 18:10 on 01-23-2008
Guess I had unknowingly already locked in that 7%- too bad with the rate cut...
Actually there was no origination fee. The broker mentioned they had to cut out some fees because there is apparently a maximum percentage of the loan that all the fees can total. As this was a very small loan ($25,200- I didn't even think I could get that small of a loan, but Michigan law prohibits discrimination based on the size of the loan) they had to cut out some fees to stay within the percentage. So I was told.
Chris
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destinriche
22 Posts
Member Since: 01/16/2008
Shelby Township, MI
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Posted: 19:20 on 01-23-2008
i didn't know they had a law like that here. so when you own a property free n clear, whats the lowest credit score you need to have to get a heloc 620? I have income docs i just don't have the score yet, i thought i could borrow off my property but they could never give me a loan until i got to 620 i was told.
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ArdenPropertyLLC
1 Posts
Member Since: 12/23/2007
Westlake, OH
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Posted: 20:45 on 01-23-2008
My partner and I have bought and rehabbed 4 singles and 1 double over the last few years financing the purchase and repairs with our equity lines.
We've done investor cash out refis on all of them to recover our investment (well most of it, we went over budget on 2) and have had no problems. Cash out refi done < 6 months after purchase in all cases.
Some Notes
1. these meet FNMA standards, meaning they can be sold in the secondary market so any company doing mortgages should offer them. FNMA does not require seasoning.
2. can go as high as 80%LTV; we've stayed at 75% LTV due to extra points/higher rate @ 80%. Generally we end up owner occupied rate/points + .75% - 1.00% to rate (no extra points). We also paid a slight premium on the double.
3. each lender had different limits as to # of mortgages to one borrower. My understanding is that once you hit 10 (your residence 1st counts as #1 and your equity line counts as #2) you can't do FNMA eligibles any more. this means rates and terms aren't as standardized
4. one appraiser asked for a repair list + receipts. the other 4 did not.
5. almost done with property #6. contacted lender a couple of months ago to make sure things hadn't changed due to subprime crisis and loan officer advised that he was still doing investor cash outs - no problem even beyond FNMA mortgage limit. Investors with credit scores below about 650 though would have a real hard time.
Good luck. Too bad you aren't in Cleveland, Ohio the foreclosure capital......we have a huge inventory of REOs in good working class neighborhoods that can be purchased for $25K - $35K and made real nice with $15K-$20K.....rents = $750 to $850 with decent tenants. Never thought I'd see this kind of cash flow on single families. I feel like a kid in a candy store every time I look at ****Must participate a while before posting URL's***.
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ypochris
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Lansing, MI
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Posted: 20:46 on 01-23-2008
I was told time and time again that I wouldn't be able to get a loan for under $50k, except that I was offered $40k for more than the $50k cost. Then I mentioned this law I read mention of somewhere and suddenly $25k was no problem.
Know nothing about the minimum credit scores as this has never been a problem for me. I suspect the lender can set it where ever they want, as long as it is the same for everyone everywhere (because they cannot discriminate based on location either).
Chris
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ypochris
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Posted: 20:50 on 01-23-2008
Beat to the post again!
Arden- sounds exactly like the Lansing market, and what I am doing here...
Chris
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joblo
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Hillsboro, OR
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Posted: 21:28 on 01-23-2008
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On 2008-01-23 18:10, ypochris wrote:
Guess I had unknowingly already locked in that 7%- too bad with the rate cut...
Actually there was no origination fee. The broker mentioned they had to cut out some fees because there is apparently a maximum percentage of the loan that all the fees can total. As this was a very small loan ($25,200- I didn't even think I could get that small of a loan, but Michigan law prohibits discrimination based on the size of the loan) they had to cut out some fees to stay within the percentage. So I was told.
Chris
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Did you sign a rate lock agreement? I thought this was required to lock a rate. If you didn't, then my guess would be that the lender is playing you. If the rates drop and they lock you in at the same rate, it means more rebate for them. Even on 25k, a 1% rebate is $250. I don't know, maybe you have a a relationship with the lender and can trust them. I'm generally suspicious of everybody.
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woland
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Greenville, SC
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Posted: 14:51 on 01-24-2008
an update. the best NOO refinance based on LTV i have seen so far is
80% LTV
1.5% origination fee
and bank rate (meaning no additional spread on what the bank will charge you for which the broker gets paid).
we are talking ~ 80K principle.
JP
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