First Time Real Estate Investing Financing

7 Replies

Good morning,

I am looking to purchase my first investment property (specifically in Noblesville area) for a buy and hold strategy in the $50K sales price, but have ran into some issues/questions regarding financing. I can pull a HELOC for approximately $30K and want to see what my options are. If anyone could assist with answer the below questions and/or could suggest a lender, I would be very grateful.

I have been advised by a couple of lenders that the minimum they will loan is $50K. Are there any lenders/credit unions that would lend less? Say $30K?

What does it take to finance a rental property such as cash reserves, closing costs, add-ons, etc.?

If I get a HELOC, is there a time frame the cash must be in my checking account prior to being considered for the down payment?

Are rental incomes considered in debt to income ratios?

What is the process on lending to LLCs? As in which lenders will lend to LLCs with personal guarantees because the lenders I have spoken to have advised only individuals?

If there is a wholesale agreement for a property, is it possible to still go through a lender to have the property assigned or must it be a double closing?

Thank you, 

Brandon 

I have been advised by a couple of lenders that the minimum they will loan is $50K. Are there any lenders/credit unions that would lend less? Say $30K?

It is very hard to find these. Most banks will have a $50k min so I suggest going to your local REIA and asking around for referrals.

What does it take to finance a rental property such as cash reserves, closing costs, add-ons, etc.?

Most I know will require 6 months PITI (principle, interest, insurance, taxes) for all properties you own including your personal residence. Closing costs will vary by city and county. Add ons would be appraisal and inspection.

If I get a HELOC, is there a time frame the cash must be in my checking account prior to being considered for the down payment?

With a HELOC since it is considered your money there is usually not a seasoning requirement but the payment will be added to your DTI calculation.

Are rental incomes considered in debt to income ratios?

Depends on the lender.  The two main purchasers of loans are Fannie and Freddie.  One of them requires you to have 2 years of rental income on your tax returns to use that income to qualify for a loan.  The other does not (I think it is Freddie but I always forget) So if you are a first time investor and you need to use the rental income to qualify make sure your lender is planning on selling to the one who will take it.  

What is the process on lending to LLCs? As in which lenders will lend to LLCs with personal guarantees because the lenders I have spoken to have advised only individuals?

You are talking about residential loans, which are only loaned to an individual. Commercial loans are only lent to a LLC but that is a totally different ballgame.

If there is a wholesale agreement for a property, is it possible to still go through a lender to have the property assigned or must it be a double closing?

I don't understand.  Why would you go through a lender to have it assigned?

Thank you @Brie Schmidt. If the owner and an investor have a contract for a home for $90K, but I want to purchase the property. The investor would like to assign the contract over to me for $100K, would I be able to get a mortgage through a mortgage lender in order to proceed with this transaction? As this is not a traditional closing, I have been advised that a mortgage lender would not finance such a transaction.

@Brandon Borah

 - I don't know, that is a wholesaling question.  Account Closedshould be able to answer

I have been a mortgage underwriter for over nine years. Just to elaborate on the above answers, Freddie Mac requires a two year rental history so you would need to go with a Fannie Mae loan. With Fannie Mae all you would have to do is produce a lease and they would take 75% of the lease amount into consideration as income.

You cannot assign a contract and have your buyer get bank financing. By the way, you can get mortgages as low as $10k. PM me. LLCs can not get conventional bank financing. The way around this issue is have access to different types of lenders. PM me and I can help you.

Thank you all! I'll PM you @Wendell De Guzman 

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