Issue getting a mortgage due to low dollar amount

10 Replies

Couldn't find a similar discussion.

I recently started working on getting my first investment property in the Pensacola, FL area.  I have enough cash to put 25% down on a smaller property (30-60K)  plus this seems to be where the numbers work best for cash flow in the area I'm interested in.  I am not planning on doing any major rehab due to being a long-distance investor.

 I called national lenders to try and get a traditional 30 year mortgage but was told that, due to federal regulations on fees relative to amount of loan, they couldn't offer a 30 year mortgage less than about 100K and only 15 year mortgages between 50-100K.  The loan officers consistently explained that because the dollar amount was so small the fees end up exceeding a certain percentage of the loan... that makes it illegal to write the loan. 

Has anyone run into this?  is there a way to get a traditional mortgage?  Maybe from a local lender?  Any suggestions?

I have no equity in other properties or cash on hand in non-retirement accounts that would allow for a cash purchase.  

I have considered a personal loan with a follow-on refi and peer to peer, but I'm a newbie and would rather finance the first deal traditionally if I can.  

I look forward to hearing your comments/suggestions.

Steve

@Steve Marshall I have seen this question here a few times. Most of the answers are try smaller banks but that will be difficult for you in Thailand. I would keep at it and I'm sure someone will be willing to set you up. Maybe try some of the internet lenders off zillow or online. If not, how about friend or family that want to earn 5-6% on $30k with a house to back it up? Or a TSP loan if you use it (not ideal but if you have that much in your G fund then you are just paying yourself the interest). If that doesn't work a personal loan could but I find those interest rates are typically pretty high.

I'm sure someone on here will have a lender contact for you that will provide small loans.  Good luck!

@Steve Marshall

Glad to hear from another Pensacola investor, and a brother in arms.

Two things: I'm in the same market as you (geography and price). I'm guessing you're looking at rents in the $650-750 range for that price. I'd be very hesitant about being an absentee landlord without a GOOD PM at that rent level around here.

Second, and more direct to your question, have you thought about PTP lending sites? I've never used them, but they were covered in one of the early podcasts about financing these exact kinds of deals. Pro: you get a loan up to $35k, and can sell/transfer the home and still use the loan for another house without having to pay back. Con: unsecured debt = credit score hit.

Good luck and let me know if I can help you out here, I'm BOG here in Pcola.

You should use Google Maps to locate banks/credit unions within a few miles of your property, especially if they are small, nationally unknown banks. They would definitely be more willing to underwrite a small mortgage given the property is in their backyard.

I did this for property in Pittsburg while I was living in California.

William/Timothy,  

Thanks. Yes, I do have a good PM, although with my other property their job is pretty easy. We'll see how it goes with a more hands-on property. I have considered doing PTP and then use the fact that I own the house to just take a more traditional lower interest HELOC. I'll do more research on that.

Do either of you have a good local bank/credit union in the P-cola area that you can suggest?

Originally posted by @Steve Marshall:

William/Timothy,  

Thanks. Yes, I do have a good PM, although with my other property their job is pretty easy. We'll see how it goes with a more hands-on property. I have considered doing PTP and then use the fact that I own the house to just take a more traditional lower interest HELOC. I'll do more research on that.

Do either of you have a good local bank/credit union in the P-cola area that you can suggest?

Steve - give Sarah @ BBVA Compass a call (850.857.5035). I understand their minimum for a traditional loan is $50k, but they might have other options for you (I.e. straight line of credit, HELOC, etc). She is helping me out with a similar situation. Best of luck!

I typically use larger banks or online mortgage companies. Have also used private money on the past 2 deals. Take Jay up on that contact. 

Try Annette: [email protected]  Tell her I sent you.  Local bank with a great in-house product for investors.  I don't think they even have a minimum loan, or perhaps it's $25K?  

@Saj Shah  I like your idea of using google map to find local banks or credit unions to finance low dollar amount loan.  I am in the process of buying a property in Scottsdale, I probably have to close it quickly using cash then refinance. 

Yes, it's worked for me several times. You're doing it right....buy it cash then re-fi in 6 months. 

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