Investor · Austin, TX · Member since 2020 · 39 posts · 18 votes
Just listened to BP REI Podcast 440 and was intrigued by the no-money-down strategy they discussed. Does anyone know of a bank or credit union that gives loans based on the appraised value rather than the purchase price?
Hoping to buy low and use the left over spread to cover the down payment on some buy and holds.
Broker · Logan, UT · Member since 2013 · 1k+ posts · 1k+ votes
5y
The trick to this is to get on title either with a private money loan or seller financing. Then season title and refinance based on appraisal. All lenders do this but have different criteria.
All banks lend on the lower of the purchase price or appraisal. If your purchase price is above appraisal, there have been programs that lend x% above appraisal to accommodate a higher purchase price. But I haven't seen one of those in a while.
If you are trying to get a better LTV (and loan) based on buying something below appraisal, the strategy for doing this is the BRRRR method that is talked about here a lot. Here's the BP Guide on how to do it.
Realtor · Lubbock, TX · Member since 2016 · 165 posts · 155 votes
5y
Hey @Isa G.! For the most part, lenders do loan based on the appraised value, but only if it is lower than the purchase price. They hire the appraiser to appraise the property in order to protect themselves, and usually can/will only lend on the lower of appraisal or purchase price of a property.
That being said, there are certainly some lenders out there able and willing to do it, but they are so busy with investor clients that the best approach is sometimes finding a private lender that's able to get more aggressive with terms. Many times, private and hard money lenders are investors themselves and understand how investing strategies such as BRRRR work, and are able to offer really decent loan packages (for example, offering reduced interest rates and long term notes to investors after successfully completing a certain number of BRRRRs with the lender and hitting agreed upon milestones).
I would be curious to hear from any lenders on here who actively and frequently lend on appraised values that are higher than purchase price, and what we can do to get more lenders in our markets to do the same!
Investor · Albuquerque, NM · Member since 2016 · 2 posts · 1 vote
5y
Agreed Isa! I was interested also...I think he mentioned it was a credit union in Idaho or North Dakota. Not sure though, would love to get this lenders contact info.
Broker · Logan, UT · Member since 2013 · 1k+ posts · 1k+ votes
5y
The trick to this is to get on title either with a private money loan or seller financing. Then season title and refinance based on appraisal. All lenders do this but have different criteria.
All banks lend on the lower of the purchase price or appraisal. If your purchase price is above appraisal, there have been programs that lend x% above appraisal to accommodate a higher purchase price. But I haven't seen one of those in a while.
If you are trying to get a better LTV (and loan) based on buying something below appraisal, the strategy for doing this is the BRRRR method that is talked about here a lot. Here's the BP Guide on how to do it.