Real Estate Investor · Denver, CO · Member since 2008 · 19 posts · 5 votes
I'm meeting with a couple of mortgage brokers next week, but a friend of mine mentioned that the mortgage companies are no longer offering 100% financing on income properties. He could just be blowing smoke in my face to distract me from my goal of financial independence, but I thought I'd throw this out to the forum.
Has anyone else encountered this lately? He claimed it is part of the fallout of the subprime mess. If so, what kind of percent down are you all seeing? My wife and I were planning on funding an emergency fund to cover unexpected maintenance and vacancies, but were hoping to keep that money and finance the property with a 100% or 95% loan.
Real Estate Investor · Las Vegas, NV · Member since 2008 · 1k+ posts · 447 votes
18y
100% financing on investment properties has become about as extinct as the dinosaur. Most lenders will require 20% down and that is just a starting point. They will also look at the property very closely to be sure the cash flow is there. Your credit will also need to be very good. The days of getting a loan by demonstrating your ability to breathe and fog up a mirror are gone. You may need to seek out opportunities that have seller financing. Your friend is correct, as I’m sure you will find out when you meet with the lenders.
Real Estate Investor · Denver, CO · Member since 2008 · 19 posts · 5 votes
18y
Thank you for the confirmation. My wife and I may be able to qualify based on our current income. At least for the first rental. Perhaps we go that route for the first purchase. But like you said, we'll see what the lenders say.
20% down is standard for investment financing. We borrow 15-20 yr. amort.
with 5 year balloon for a few months (also to make a full cash offer) and then try and arrange long term financing after things are rehabbed and rented.
You can do cross collateraltization for your purchase for the 20% down with a smaller bank with a healthy commerical loan department. In this day and time you're really happy that you've got a track record and a relationship with such an institution because the financing for investors can shut down rapidly--for example, the new requirement under Freddie Mac that you can only have 3 mortgaged properties plus the one you're finanacing. We've been allowed 10 for the past 10-12 years and now suddenly you won't be able to get a loan. Also, the example of lender's shutting down HELOC's.
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