Vineland, NJ · Member since 2016 · 42 posts · 6 votes
Okay so I've found a few properties that I want to purchase to start renting them out. After months of looking at properties. I attempted putting in an offer on a property that costs 54K. I have 20% to put down. The real estate agent is telling me since The house cost is so low I have to purchase it full cash because nonbank will fund something so low. Is this legal?? I think it's crazy. I see stories on here everyday with people purchasing and never heard of this. The property is in Nj btw.
Charleston, WV · Member since 2016 · 42 posts · 37 votes
9y
Visit the small local banks in your area. I just recently acquired a mortgage on a SFH for $38k from a local credit union. If you have the 20% and good credit, it can be done.
Real Estate Professional · Memphis, TN · Member since 2009 · 1k+ posts · 1k+ votes
9y
I have heard of a some lenders doing conventional lending on loans under 50k, however, the closing cost is such a large proportion to the loan amount, it really does not make much sense. Your 52k loan with 20% down would be a loan of $41,600. The closing cost could easily rack up to $6,000 when you start talking escrow set up, loan points, appraisals, recording fees, title insurance, etc. You are talking 10 to 15% of the total loan amount in closing cost. You can find local banks to do those types of loans and their cost is going to be much cheaper, however, the terms may not be as favorable. Expect 15 to 20 yr amortization. Rate of 5% or so locked for only 5 years. If it is a good deal, I would find a way to make it happen. Maybe private lending.
Investor · Normal, IL · Member since 2017 · 89 posts · 75 votes
9y
I agree with trying small banks rather than the large ones. I couldn't get a loan under my LLC at a major bank because it was too new, but a small bank is giving me one. My broker was able to steer me in that bank's direction.
Investor · Asbury, NJ · Member since 2015 · 226 posts · 205 votes
9y
Find a partner to go in on a cash buy with you or look at HML or crowdfunded loans or try small banks and credit unions. If it's a good purchase, there is someone who will want to loan you money for it, you just have to get creative! Best of luck!
Investor · San Diego, CA · Member since 2014 · 21 posts · 7 votes
9y
Agreed. Smaller, local banks. I initially ran into the same issue on a deal recently in central Florida, but when I was in town I door knocked to some regional and local banks and got it done.
Real Estate Agent · Bentonville, AR · Member since 2015 · 4 posts · 2 votes
9y
You need to find a good mortgage broker. Maybe lenders have changed in the last 6 years or so, but I purchased a $50k house with 25% down on a 15 year fixed conventional mortgage as an investment with no experience. Of course 2011, was a different environment than today. Your agent and even the lenders who are paid commission as a percentage of purchase price may just be unwilling to do a small deal if they know they could get you to do more. Or maybe the agent is just so busy, he/she doesn't want to mess with it. Find a new agent and a new lender because you can definitely get this deal done if you're a qualified buyer in terms of FICO and debt to income. The lender ended up being in NJ too! PHH Mortgage
There are actually acquisition lines you can qualify for through portfolio lenders that would get you what you're looking for. How many more properties are you looking to purchase this year?
Investor · Las Vegas, NV · Member since 2016 · 37 posts · 24 votes
9y
@Shawn Munoz Most banks have that 50k rule because they repackage the loan and sale it off on the secondary market. The secondary market won't buy anything under 50K so that rule is really not from the bank but from the secondary market. The fact that most banks don't hold onto the loans that they make means that they have to abide by the rules set for them by the secondary market, thus the 50K minimum requirement.
That said there are portfolio lenders like @Adam Giles mentioned. Portfolio lender simply means that they keep the loans that they make in house and don't resell them to other investors on the secondary market. By not reselling the loans they don't have to abide by the 50K minimum rule and can be more flexible on things like DTI etc. I talked with Navy Federal Credit Union and they keep all of their loans and they'll lend all the down to 10K! 75% LTV on investment properties. So it can be done. Just find a institution that keeps their loans in house.
USAA will usually fund 50,000 minimum conventional loan. 15% down for a single or townhouse.
I'm actually in the process of talking with USAA myself and have been told they can do a loan for the property I am looking at which is 72,500. Oddly, they have the best rate compared to small lenders in my area... that's pretty sad.
Real Estate Agent · Orange Park, FL · Member since 2017 · 61 posts · 16 votes
9y
@Brian H. Yes, I absolutely love USAA!!! Navy Federal is another option as they allow you to finance as little as 10,000 for an investment loan, but they require 25% down.