Specialist · Harrisonburg, VA · Member since 2011 · 26 posts · 5 votes
Hi all.
I am looking for lenders that will finance properties 5+ that work in Virginia. I am having a pretty hard time finding any banks that will finance property #5, as we already have 4 financed properties.
Does anyone know of any investor-friendly lenders that will work with me in Virginia? Good credit score, reserves, etc... so none of that stuff will be an issue.
Investor · Cincinnati, OH · Member since 2010 · 1k+ posts · 928 votes
15y
I made a few calls. Met Life, Everbank, and Nationstar are all "NO" on investment property loans when you already have 4 or more financed properties.
I called Citibank to verify, and they reconfirmed that they they'll do loans up to 10, and today's 30yr investment property rate is very competitive at 5.125% with .25 points, $665 of bank fees (processing/underwriting), and max LTV of 70% on 2-4 unit properties (75% LTV max on SFR). This was based on a sample transaction I gave him of a $100k purchase.
I spoke to Tom at Citi's 1-800 number on their web site. He said that Citi follows FNMA guidelines with very few "overlaysâ€. The overlays are the additional restrictions that most banks apply, one of which caps you at 4 financed properties. When you go over 4 loans, you do have to have 720 credit, 6 mths cash reserves on all your investment properties, and zero blemishes on your credit (i.e. nothing 30 days late in the past 12 mths).
U.S. Bank will do up to 6 in many area markets as well, if you call your local U.S. bank mortgage office.
Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes
15y
If you are asking the residential lenders at the bank who sell the notes, you're not going to get anything. You need to go across the hall to the commercial loan department, they should be telling you that. Different rules, loan termsand requirements. Also consider a credit union that holds the loan.
Another option for a commercial loan is to roll your properties over to a blanket loan making the deal worth while for the lender. Just make sure that you have a release fee to be paid down on the one loan so that each property will be released if it is sold. Good luck
Investor · Reston, VA · Member since 2011 · 683 posts · 191 votes
15y
Are you in Northern Virginia? The reduction from 10 to 5 reminds me of the early 90's. I have a great lender, but it is Commercial (portfolio) and more expensive than conventional - but nowhere near hard money. 6% with a point for a 5yr fixed.
Specialist · Harrisonburg, VA · Member since 2011 · 26 posts · 5 votes
15y
Thanks all.
I was hoping to purchase a few more properties, hopefully up to 10, using conventional Fannie/Freddie financing, before I had to go the commercial approach. But, if the environment is pushing me that way, then I am definitely open to exploring it.
Real Estate Investor · Takoma Park, MD · Member since 2011 · 74 posts · 38 votes
15y
I am in the same boat Nate, and so far I have not been able to find reasonable rates to finance the 5th property. I have missed out on 2 deals because of this, and I'm considering looking at commercial for exactly this reason. Let me know if you come up with something that works...
Investor · Cincinnati, OH · Member since 2010 · 1k+ posts · 928 votes
15y
I made a few calls. Met Life, Everbank, and Nationstar are all "NO" on investment property loans when you already have 4 or more financed properties.
I called Citibank to verify, and they reconfirmed that they they'll do loans up to 10, and today's 30yr investment property rate is very competitive at 5.125% with .25 points, $665 of bank fees (processing/underwriting), and max LTV of 70% on 2-4 unit properties (75% LTV max on SFR). This was based on a sample transaction I gave him of a $100k purchase.
I spoke to Tom at Citi's 1-800 number on their web site. He said that Citi follows FNMA guidelines with very few "overlaysâ€. The overlays are the additional restrictions that most banks apply, one of which caps you at 4 financed properties. When you go over 4 loans, you do have to have 720 credit, 6 mths cash reserves on all your investment properties, and zero blemishes on your credit (i.e. nothing 30 days late in the past 12 mths).
U.S. Bank will do up to 6 in many area markets as well, if you call your local U.S. bank mortgage office.
Specialist · Harrisonburg, VA · Member since 2011 · 26 posts · 5 votes
15y
Thanks Darryl and David.
I actually called Citi Mortgage this morning too and was told that they will only do #5 - #10 if it is a primary residence, not an investment property. Of course, I had to prod to even get that information, so it could have just been the loan officer I spoke to. Did you get a direct number for Tom? He sounds more knowledgeable.
I will also check out the local U.S. Bank branch to see what they say.
Investor · Reston, VA · Member since 2011 · 683 posts · 191 votes
15y
As far as I know, it goes deeper than # of mortgages. Last I heard, any rentals have to be "seasoned" two years for the rental income to count. In other words, it needs to be on your tax returns for 2 yrs.
I got the impression that the LO's don't want to deal with complex stuff. If anyone has an investor friendly lender, please let me know Otherwise, I'll pay my no-hassle 6% with a 5yr adjustment..
Specialist · Harrisonburg, VA · Member since 2011 · 26 posts · 5 votes
15y
Cheryl. What happens after 5 years with the commercial loans? Do you have to re-fi or does the lender just adjust the rate based on some index and give you another 5 years?
Investor · Reston, VA · Member since 2011 · 683 posts · 191 votes
15y
Yes, they adjust. I'll be over the best conventional by about 1-1.5%. They will not be called and there won't be any new "qualification" required if you've met your obligations.
Investor · Cincinnati, OH · Member since 2010 · 1k+ posts · 928 votes
15y
Tom's direct line at Citi is 734-295-6613. He did sound like he knew the ins and outs. I had no connection to him prior to calling today.
I have called all the banks in my area, and have found 3 that will loan beyond 4 loans. Be sure to call ALL the smaller banks, savings banks, and S&L's. Some are "direct" to FNMA, or will have a particular investor on their roster, that will do the 5+ loans. To my knowledge, the 2 year requirement is stated in the FHLMC guidelines and pertains to your landlording experience (demonstrate that you have Sch. E income for the last two years on your returns), not a particular property.
If you're going to use bank products:
1. Make sure it's a 25-30 year ARM, not a balloon. If a bank gets overweighted in your loan type, has bad default experience, or gets a reprimand from its regulator, it can and will decline to renew your balloon loan, regardless of what the lender says up front. I've seen it in my market with some of the wobbly banks (they didn't look wobbly five years ago -- things change.)
2. Make sure it has a lifetime cap no more than 6 points above the inception rate (should also be a 2% annual increase hike).
3. Make sure that the net yield on your property (cap rate) is at least equal to this lifetime cap, and preferably a point or more higher.
Specialist · Harrisonburg, VA · Member since 2011 · 26 posts · 5 votes
15y
Great information everyone. Thanks so much for contributing.
I have been calling local banks and have heard no from all but one of them, but I still have several more on the list. Once I find a good one, I will work on establishing a banking relationship with them, which should help facilitate future loans.
I am going to put the commercial side in the back of my brain too in case I don't have good luck with conventional residential lenders or terms change again for the worse. I will definitely need it for properties 11+ anyway.
Montecito, CA · Member since 2008 · 6 posts · 5 votes
15y
I have 12 properties now. I had no problem gettting to 9 mortgages the last 3 for cash. I have been doing them in Bellevue Washington and Indio and Santa Barbara California. I paid an extra point for the 5-9 loans. I am getting below 5% 30 year fixed investor properties, 25% down. Call my partner and also my mortgage guy, Michael Vaksman. We are holding off on the 10th becuase we may want to do the last one as a larger purchase. Hope this helps. We are looking for mortgages 10-20 and working for best rates.
Residential Lender · Austin, TX · Member since 2011 · 17 posts · 5 votes
15y
These 2 groups definately will go up to 10 FNMA properties. Purchase financing at 75% LTV, must have at least a 720 FICO and 6 months reserves for each property required.
"Crescent Mortgage" our ot Atlanta, GA & "360 Mortgage" out of Austin, TX.
Real Estate Investor · Audubon, PA · Member since 2009 · 13k+ posts · 8k+ votes
15y
Originally posted by Nate Shaw:
...
I actually called Citi Mortgage this morning too and was told that they will only do #5 - #10 if it is a primary residence, not an investment property. ...
That sounds SO retarded - like anybody (other than some movie star / jet setter) would need to live in properties 5 through 10 ...
When you talk to them use the idea I'm pointing out, just don't word it as harshly!
Specialist · Harrisonburg, VA · Member since 2011 · 26 posts · 5 votes
15y
Yeah, I think 6 months is pretty hefty, but the banks were burned pretty good by "investor" flippers previously, so now they basically seem be taking the stance that we don't want your business Mr. Investor unless you are experienced, have great credit and have boatloads of cash.
I understand why they are doing it. They are trying to mitigate their risk as much as possible. But, that does not mean it does not suck for us investors.
Rental Property Investor · Mercer Island, WA · Member since 2008 · 22k+ posts · 14k+ votes
15y
Whether it is or it isn't a large amount of reserves, its whats required. Retirement accounts (401k, IRAs, etc) can be counted, at a discounted rate that factors in the taxes and penalties you would have to pay to use that money.
Rental Property Investor · Manteno, IL · Member since 2009 · 2k+ posts · 2k+ votes
15y
Fannie Mae actually changed their requirements recently for cash reserves. They now only require 2 months of reserves for each property plus 6 months for the property you're buying.
Now whether that guideline has filtered down to the lenders or not, I don't know. But hopefully it will at some point.
I'm just wondering when some big institutional investor is going to wise up and start their own niche lending firm to do blanket/portfolio loans for investment properties.
There is no competition and they could get much better rates. But what they should really add as a requirement is cash flow!
Am I the only one that questions how these clueless bankers are running their business? Risk of an investment property has less to do with LTV than it does to do with pure cash flow. If I'm losing $200 a month on a house, then it might default if something bad happens (lose my job, tenant eviction etc). If I'm making $400 a month and something bad happens, that house isn't going anywhere. I'll give up my primary residence before I'd give up the income generating house.
I understand LTV is somewhat important. But if the banks would look at the defaults on investment stuff, I'd bet anything that the ones they got back were from speculators whose houses weren't cash flowing much or were negative.