Any Investment Loan Tricks?

Question

Can you get a conventional 5% loan or an FHA loan if you are living in another house? How would the lender know?

Can you get the new loan, move in - then move back out to your old home? Any leveraging tricks I can be made aware of?

Chris Mason · Answer

Bankers have better lobbyists than you, which means that the laws are stacked in our favor and the court will not be particularly fair to you.

Don't commit mortgage fraud, please.

Chris Mason · Answer

Fannie Mae and Freddie Mac subsidize it. Lenders aren't in it for the 5% spread over 30 years. They are in it for the quick resale on the secondary market.

Simplistic model:

Let's say I lend you $500k, I have zero costs (lol), and Fannie Mae or a South Korean Teacher's Pension Fund buys that loan from me for $510k. I have $10k in profit, and my original $500k back to lend to the next person.

Let's say I flip that same $500k 10 times in a year.

I just earned $100k on $500k.

That's a 20% ROI.

In reality there's a lot more going on, various estimates say the net cost to originate a single loan is $4500 to $8500 mostly due to Dodd-Frank and CFPB... probably 0.5% of your interest rate is just that alone.

Caleb Jordan · Answer

If you are getting a loan as a primary residence you must intend to occupy the property as your residence. if you buy and say you are buying it as your residence but the whole time you are planning to basically not live in it, that is  lying and could get you in trouble for mortgage fraud. you may not get caught, but if you do it is taken seriously, beside legal trouble lender could call the mortgage due if they found out you were lying.

Finding loop holes is fine! Lying on applications is not!  That is a terrible way to try to get into investing, where building relationships and trust is super important.

Generally you need to live there for a year at least . Now if you lose your job or something and have to move out for an unplanned reason, that is different.

Chris Mason · Answer

Yup, but more importantly the consumer feels better because their loan "wasn't sold," which can translate into referral business. It can also go even deeper -- what if the loan AND the servicing are BOTH sold, BUT the original lender authorizes the loan servicer to use their trademark and branding, and authorizes the 1-800 number employees to answer the phone as if they were Wells Fargo employees? Consumer would never know, unless they are one of the 1 in a 1000 to view a copy of their check online and see who endorsed the check.

Caleb Jordan · Answer

Your probably are not going to find anything below 5 percent. You can try local credit unions or small banks in your city. But most of them will want a track record of invesment experience to give you good terms. You generally have to live in property for a year if it is a primary residence. Living in a property for a year to get low rates and low downpayment may be worth it.

Tim Kanak · Answer

Interesting... when loans are sold to the secondary market, but the original lender continues to service the loan, does the original lender get a service fee?

Tim Kanak · Answer

Of course not without an equity stake, however there must be some incentive from the government for lenders to provide home loans, correct?  Otherwise why wouldn't all home loans be at a 7% rate or higher?  At least the real estate is less volatile and can't go to zero.

Chris Mason · Answer

It's irrational to lend money out for a lower interest rate than the anticipated ROI from parking it in a Wall Street index fund.

Would you lend me money at 4% if you thought you could park it on Wall Street and earn 7%?

Tim Kanak · Answer

What’s the minimum length of time you need to live in the home?  I know people live and fix.

Tim Kanak · Answer

10-4. Are there any recommendations for private or smaller lenders who have lower rates than what banks are offering on investment loans?

Any Investment Loan Tricks?

Most Popular Reply