Where to have fund to buy first property

Question

Hello Everyone, I applied for a mortgage so that I can buy my first rental property but unfortunately my mortgage application was declined by several banks. I have 10k saved up that I am willing to put down. What else can I do? Any help or suggestion will be highly appreciated. Thank you all!

Bob E. · Answer

@Ebrima Drammeh I see from your profile you are still a student so good for you in getting started early. What school are you going to?

10k is a decent down payment in central MI, I would look for a seller financed deal close to campus where you could rent to fellow students. We just sold one of our properties in Lansing with 10k down and seller financing and are starting rehab on our second one soon.

Keep in mind that you will need a reserve for once you take over the property to cover any big ticket maintenance issues.

John Quebedeaux · Answer

Local banks-If you have average credit, income, assets, and a strong deal then some banks will fund the entire project. When speaking to these banks, ask for their commercial lending division. Most banks ask for 15-20% down. 2-3 week turn time. May be a balloon note requiring a refinance.

Conventional Rehab Loans-These are processed through a mortgage broker. Typically requiring 10% down, general contractor, above average credit, income, and assets. With great credit you may be able to get a stated income or no ratio loan. Most programs will have it set up so you pay interest (prime + 1 or 2) on what you've borrowed. After fixing up, the great thing about these loans is that it modifies into long term financing. So no refinance needed if you are retaining for income properties. Cost can vary as you have lender fees and broker fees. These can take 4-6 weeks to complete as the lender has 2 reviews, construction work and personal data.

Hard Money-Score requirements not an issue. No income and asset verifications. Maximum loan is about 70% of the after repaired value which can fund the entire project if it fits. Loans can be funded in 2 weeks. Terms are 6 months. Rates will be higher than the other sources due to the increased risk and flexibility.

Jim Keller · Answer

Don't give up, some of my first deals were done with partners. I think with a good plan to always be looking for great investment quality real estate you can always find smart money to help you fund the deal. Half a good deal is way better than 100% of a mediocre investment or having not been approved by a bank and gotten 0% of a big deal....

You will run into many deals you won't be able to close just get better at seeing the big picture. All or nothing is not a good strategy, if you get no support at 100% ownership it's no loss to give 50% away. Then find another with the same investor and trade equity positions...... then you get what you want.

good luck

jim

Jerry Padilla · Answer

@Ebrima Drammeh

like @Shawn M.

we need more details as to why you were declined to try and assist you.

Shawn Mcenteer · Answer

What is the reason for getting declined? Go to more lenders particularly local lender not national banks/lenders. Larger banks, especially ones on the national level will use ABC algorithms that do not allow people with any faults to get the "amazing" loans they offer. A smaller bank can adjust there lending to fit an investor. Shop around.

Where to have fund to buy first property

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