How can I get the good loan? Should be easier!!!

17 Replies

Hi Everyone, 

So, I'm a SFH investor in the Eastern PA area. We have a couple properties in LLC's and we are ready to scale up...

... we cleaned up the balance sheet, we cut down our expenses, we improved our credit, we saved money for a down payment, we found the [great] deal, we made the offer, we got the contract ...

...now we need a good banking partner to give us 75% LTV or 80% LTV (I would take more :) ) 25yr amm. (I would take 30yr amm :) ) and allow us to rent it out...

This is where problems start, after discussing our prospects, plans, future with several banks here are some highlights:

-We ran into bankers who want a tenant in place before we buy the house (the good deals come when the owner moves out imo!!) (Mr. banker I can't show a property I don't own!)

-Some who say no bank will fix rates for more than 5 years (c'mon, banks close on 30yr fixed all day)

-Insane interest rates (9%+ in some cases)

-20 yr amortization (so common, what happened to 25yr??? God forbid 30yr???)

-Closing costs upwards of 7k on a 110k property (hahaha)

-Moores law basically existed in the last several days with each of these conversations

Has anyone run into this mayhem? I thought it was the banks job to close loans to good customers?

We have an existing business, superb prospects, and a good plan. Why can't I get a good loan?? 

Would love to hear your advice and stories of the same .....

Samir Shahani 

typical LLC mortgage loan is 30 year amort. but 5-7 year term, some have 10 years. Most companies will just refi a few years before the end of the term.

If you use an business entity to buy (LLC) then you're going to get a business loan. The terms you have been quoted are market rate business loan terms

if you want a residential mortgage underwritten by fannie/Freddie, then you need to put them in your personal name.

this is not bad banking, you are getting the correct bank response. I am a banker and we LOVE to close loans to good customers, learn the products banks offer and the qualifications for the loan you want and you'll have no problem.

Hi Samir,

There are loans available to accommodate your purchase scenario. You are close on the closing costs #, because it is an investment property you will pay points, and Pennsylvania and its respective counties have notoriously high transfer tax rates. The terms and rate you pay are dictated by your credit score and experience with real estate investment . You don't mention if the property you have a contract on requires rehab or cosmetic help.

Rental property loans are available with 30 a year term, and because it is a rental/ investment it will be more expensive. Just don't pay upfront fees! (except of course appraisal)

Try Harleysville, Fulton, Vist, Univest, Peoples ... you want smaller, local banks that are aggressive with their portfolio loans. Once they get too big, they become useless for most smaller investors.

@Samir Shahani

A few thoughts: 

  • 75% to 80% LTV is doable.
  • Most banks won't do 25 to 30 terms for this kind of loan.
  • Closing costs don't always directly scale based on the purchase price. Regardless of whether the property is worth $10,000k or $10 million, there is a certain amount of work that the bank needs to do. Now if the bank is charging you 7k on 110k property just for their fees, that's high. But if it includes other closing costs, not necessarily absurd.
  • 5-year adjusted rate is pretty common for this kind of loan. You can find banks that will fix the rate but they typically ask for a higher rate.
  • As for the bankers who want a tenant in place before the purchase, it's probably because their underwriting guidelines require them to show T12 to T36 income for investment property loans. Bigger the bank, the stricter the underwriting requirements. It is what it is.

The above is basically what I've seen as someone who closely worked with bankers for many years. In the portfolio loan world, banks think differently since the feds don't guarantee the loans. 

In any event, if you want some bank contacts, I'll be happy to put you in touch with them. 

Disclaimer: While I’m an attorney licensed to practice in PA, I’m not your attorney. What I wrote above does not create an attorney/client relationship between us. I wrote the above for informational purposes. Do not rely on it for legal advice. Always consult with your attorney before you rely on the above information.

75% ARV on a 30 year fixed note is entirely possible without a tenant in place. You just need to call more lenders. Your closing costs are pretty accurate though. Between escrow and transfer tax, $7k is about right.

Things must be different in PA. I completely disagree that this is a "business loan" as one of the posts claim. it is a commercial real estate loan which is NBD. I just closed 2 loans yesterday both commercial loans , here are the terms:

1.) Did a loan modification combined 11 SFH into 1 loan 14 year amortization 7 year fixed rate 4.75% other than appraisal which was $375 paid a $250 fee

2.) Same scenario on 8 SFH same fees 13 year amortization with a 7 year fixed rate of 4.75%.

The terms and interest rates your describing seem absurd to me. these terms / rates I have described are similar to many lenders in our market. Check with a local lender vs National as they seem to be higher.

My thoughts happy hunting!

lendingone.com advertises as low as 4.99% amortized at 30 years, with an arm or 5.49% amortizated at 30 years fixed. Though you will likely have to meet some strict requirements, I would try them out.

The above is correct and you can 100% get 30 year fixed loans in a llc. It’s a misnomer that you can’t get conventional loan terms with the borrower being an LLC. Lendingone mentioned above is one of a half dozen lenders I know that go out to 30 year fixed. Their rates average high 5%s if you have decent credit. You will need to put 25% down or reverse they will cashout to 70-75%.

[Not related to the substance of the post, but in case anyone wondered]

Moore's Law: Every 1-2 years, computer processing power will double.

Murphy's Law: Anything that can go wrong, will go wrong.