Oklahoma City, OK · Member since 2017 · 11 posts · 0 votes
I was wondering, can you buy a property and flip it just a little bit and sell it for a small profit with in couple months?
Does the bank allow you to do that if it’s a conventional loan or does it have to be your own private money or hard money lender?
Is the conventional loans only for rental properties? Or how long do you have to hold it before you can sell it?
Thank you for the answers in advance
Investor · Phoenix Arizona, USA · Member since 2018 · 176 posts · 105 votes
8y
I would recommend reading your loan docs. Look for terms like "early payoff penalty" and the like.
As a conventional loan officer, I am highly discouraged from originating loans if I suspect it will be paid off in a very short amount of time. In fact, if a loan is paid off or goes delinquent within the first six months after closing, they charge me a fine against what they paid me in the first place.
I won't say it's impossible, but it's bad practice.
Investor · Phoenix Arizona, USA · Member since 2018 · 176 posts · 105 votes
8y
I would recommend reading your loan docs. Look for terms like "early payoff penalty" and the like.
As a conventional loan officer, I am highly discouraged from originating loans if I suspect it will be paid off in a very short amount of time. In fact, if a loan is paid off or goes delinquent within the first six months after closing, they charge me a fine against what they paid me in the first place.
I won't say it's impossible, but it's bad practice.
Rental Property Investor · Durham, NC · Member since 2016 · 7k+ posts · 7k+ votes
8y
DeWitt Gibson this isn’t related to the original post but you just basically confirmed what I’d heard too regarding the fine if it’s paid off to soon.
So my question is what’s the minimum amount of time a bank needs a loan to be kept for them to make their needed profit margin? If I take out a 100k 30 year fixed loan but only have it for say 5 years does that still give the bank their needed profit etc?
Oklahoma City, OK · Member since 2017 · 11 posts · 0 votes
8y
Thank you guys for the knowledge..
I won’t do it if it hurts my loan officer or my broker/realtor .
I have really good people working with me and I wouldn’t want to lose them.
So I will have to fund it with either private money or hard money lender in this case.
Appreciate the knowledge you guys are sharing and I m learning so much.
Thank you all.
Just to be clear, we are talking about conventional mortgage loans. Hard money / private money may be designed for short term financing.
The actual break-even depends on a lot of factors. Whether the loan origination fee is paid by the buyer or lender, what type of loan it is, whether it is resold or keep on the books, the amortization schedule, etc.
All I can say is that the standard with my employer is six months. If the loan is paid off or goes delinquent before six months, they come back after me for originating a bad loan.
Conventional loans are really designed for long term buy and hold. SO, if I were originating a conventional mortgage for you I would really try and make sure that you intend to hold the property for at least six months. I would say that at least a year is a better benchmark. These loans do go on your credit report and so the next time you apply for one the underwriter will review your credit, if they see a pattern of short term loan payoffs they may not be excited about underwriting another loan.
Again this is a conventional mortgage I am talking about, not hard / private money. Go to town on hard / private money :)