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John01

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Posts: 2
Reply with quote  #1 
I am looking to buy my 1st investment property in MA, I am looking at 2 & 3 family homes with hopes to find one to purchase and rent out.

I have great credit, no debt other than my primary mortgage and a car loan. I make a decent salary as well. I have a small amount of cash for a down payment.

The wind was taken out of my sail by the mortgage people. They say I'll need at least 25% down, and because I have no experience as a landlord they want 6 months of Principal & Interest, Taxes & Insurance. Also because of my lack of experience they will not allow the rents to be calculated into the mortgage! They said this is new this month and it was a lot easier just a month or so ago.

Has anyone else come up against this and if so have you found a lender or a way around these requirements. Should I be looking to finance in a different way like a rehab loan.

I really would like to get into the game now before things get better and prices and interest go up.

John in Massachusetts




OHlandlord

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Posts: 3,720
Reply with quote  #2 

I have not bought a property that recently.  But I suggest you call another mortgage company and talk to them frankly about their requirements for a loan.  Not all banks are the same on qualifications.  Some make their qualifications much tougher whenever they have too many loans.  (Seen this happen a lot.  A bank's rates go up when they have too much money loaned out and not enough on deposit.)  Try another bank.  Shop around just as you would with any other purchase.

yikes

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Posts: 383
Reply with quote  #3 
I know that if you get a construction loan, if the equity in the property ends up meeting or exceeding more than 25% of the appraised value (appraised value after improvements), you don't need 25% down.  I think they want something down, so you have some skin in the game, but as to how much, I'm not sure exactly.

If anyone knows more about this, I'd love to hear about it.  I don't have the 25% down right now either, but would like to get another property.
OHlandlord

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Posts: 3,720
Reply with quote  #4 
I have been researching this over the last 2 weeks as I contemplate buying a house close by going through foreclosure.  I found a large discrepancy between different mortgage companies and banks. 

Some wanted to do construction or rehab loans at an ARM rate.  Those could be refinanced later for standard terms.  Some only would do standard 15-30 yr fixed rates (at a slightly higher rate for investment property).  One offered me a piggy back loan (standard 1st mortgage and ARM second to eliminate the large down payment). 

One offered a no money down loan (higher rates of course).  One offered a 5% down option (but pay PMI).   One

Another suggested a HELOC on my primary house to use for purchase and remodeling, then convert to a standard after it is fixed.  Even the HELOC terms varied from a 1 & 1/2 % of balance monthly payment to interest only payments. 

So I strongly suggest calling many banks up and just talking to a mortgage officer.  Let them know who you are (a local investor) and what you want to do.  Ask what they have available in their portfolio now.   Right now there are many options on the table for people who have good credit.  Banks want to loan to those with good credit and to dump some of those bank owned property out of their files.
Sam

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Posts: 563
Reply with quote  #5 

Stay away from Wells-Fargo.  I have been jumping thru hoops for them to refi one of my investment homes and after 4 months of giving them "blood" basically at every one of their new whim requests....they decided they can't do it now.  Back to square one.  Just a warning to others.

yikes

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Posts: 383
Reply with quote  #6 
The same thing happened to me with a local bank.  We were set to close, and then they weren't ready, needed more documentation, we promptly gave it to them, weren't ready again, weren't returning calls, over and over, then our locked in rate expired and that was that.  GAH so frustrating.


OHlandlord

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Posts: 3,720
Reply with quote  #7 
I can understand Wells Fargo.  A huge bank, they have their hands full because of this mortgage crisis.  You have little to no leverage with them.  A local bank, you should have.  If the rate lock expired because they weren't ready to do closing, I would insist that they renew the rate lock.  You should have much more leverage with the local bank.  Talk to the president or branch manager if needed.  Explain that you did everything that you needed to do but that the officer didn't finish it in time.  If your credit is good and you have done all that was required for them, and it was delayed through no fault of your own, they should renew for you to keep a local valued customer.  Word of mouth can spell doom for  local bank.
Dennis3456

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Posts: 5
Reply with quote  #8 
If you have a good credit rating I will give you two sources Quicken loan online, and
http://www.nationalmortgagealliance.com/ both have offered me excellent terms and low interest rates fixed at 15 or 30 year terms.



yikes

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Posts: 383
Reply with quote  #9 
yeah, it was so frustrating.  they said we're waiting on the underwriter, and kept making excuses, I'd check in and keep on them, and they kept saying that other people weren't getting back to them, then the next thing I know, our rate had expired two weeks prior. 

I can't stand the guy i work with, but we are refi-ing a duplex that I co-own with someone else, and they really like this person (why, I have no idea).  I called around some other places, but they have the best rates (they are giving us the same deal as before).  We are set to close on the 22nd.  let's hope so because I'm leaving the country on the 23rd and can't set it back again.
OHlandlord

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Posts: 3,720
Reply with quote  #10 
You should call the guy and tell him that the closing date is final as you will be out of the country after that.  Set a fire under him to get it done!
Triton

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Posts: 1
Reply with quote  #11 
I am in the process of buying a 6 unit and the financing with the banks has been beyond crazy ... ranging from 40% down to 50% owner occupied. Went thought a spreadsheet of over 20 banks and all I can say is it's not what you have but who you know.
Long story short I got a loan from a small local bank working with a Mortgage Broker.
Keeping plugging away.
yikes

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Posts: 383
Reply with quote  #12 
Triton is right.  I work with a bank on a lot of properties, and they are willing to let me buy something with NOTHING down.  Anyone else would require me to have at least 20% down.

They have to approve it and it has to be a rehab situation, where we can make some improvements and gain significant equity in it once we finish renovations.  There are lots of places on the market in need of some work, but the trick is not just to find this but find something that will cash flow well when it's all said and done.  That's the problem I'm having right now.  The bubble has burst long ago, but prices are still too high.  The numbers on most places don't work, especially once you consider how much $ you'd have to put in to make it rentable/code compliant.
wpd7

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Posts: 30
Reply with quote  #13 
yikes-  Does the bank you work with do business in CA?  If so, do you mind providing an introduction/contact?

I know you're from SD, so I'm hoping that's the case with your bank...  =)

yikes

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Posts: 383
Reply with quote  #14 
They are a local bank in Minneapolis/St Paul, where I am now.  I used to live in San Diego but moved a few years ago.  Still have my property though because of the market tanking.

Sorry I couldn't be of more help.
Mr_Income_Property

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Posts: 1
Reply with quote  #15 

US Bank is just as bad... I have been buying aggressively for a few years now and commercially financing groups of SFHs.. They tell me "buy buy" we will finance you.. so i buy, now 7 months later and hoops and hoops they say they cant to it..... So i asked my banker.. "Is it the same guy who wrote mortgages to people without jobs the past 10 years that is making this decision, cuz if it is, that makes sense.. Luckily I can swing this till I get financing somewhere else or just absorb them into my "portfolio"  These huge corporate banks "to big to fail"   hahahahha..... to big to suceed if you ask me.. my properties are cash flowing bout 30%..... US Bank employees are retarted!!!!!!!! 

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