Is this a good loan deal??

Question

This is my first essentially official mortgage.

I applied at Quicken Loans for refi of my first investment property that I had bought cash. I asked for 70%LTV. I was offered 90.000 which 4K will be closing cost at a APR 5% for 30 years.

Should I shop around? If so where?

I had been turned down by my bank Wells Fargo for a home equity line of credit 5 months ago, because of my young credit history and also because I had only 1 month with my current employer. They also started that I had too many credit inquiries but that I cant do nothing about, especially when I had to get a couple of credit cards 2 years ago when ai came to the country, a car, and now mortgage.

This loan will fund my 4th deal.

Joe Fairless · Answer

@Pavlos KasselourisI would find 10 local community banks and/or credit unions in your area and go in and speak to them. They can be more flexible because they are portfolio lenders (i.e. they keep your loan in their portfolio instead of selling it in the secondary market). I suspect a local bank or credit union can beat that offer. And even if they can match it, it's better to go with them from a long-term relationship standpoint.

Pavlos Kasselouris · Answer

Good news at last! I found that I was conditionally approved with the initial application I had made...not 70% LTV I had hoped, but something like 62%. It enough for me to do what I have in mind, so I'll take it and go for the next deal!

Pavlos Kasselouris · Answer

A couple hours ago I found out that I was rejected for the Refi I applied for (supposendly I was prequalified)...

Now that I relaxed and steamed off on my elliptical, I am able to write about it, and ask about advice on what to do next.

It really pisses me off because I have a good credit score (730), I have a good paying job the last 7 months(before that I served tables, which is something that was negative for them...), I wanted to refi 70% (which means I would have a huge collateral to risk) on a positive cashflow property, have another 2 properties, and I have never one late bill! I even told them that I will pay off my vehicle to reduce the debt to income ratio because they believed the rent I pay is a lot, and have not 3, not 6 months of reserves, but over a years worth.

I was told by a banker not to say that I want to buy another property, because underwriters think it is negative. Its better to say that I'll buy a boat, or go vacation...pfff. But I told them the truth.

I dont want to wait one to two years of steady employment...thats stupid!!

Pavlos Kasselouris · Answer

Thank you Marcela!

I haven't found yet my new deal! I was planning having that 85K in the bank so I'm able either to use cash on my next offer on a SFH, or to put it down as a down payment if I was lucky enough to find a 5-8 unit apartment which met my criteria.

The house I'm trying to refi has a 130K approximate value. I did a CMA a month ago that came 132K without taking in consideration the complete rehab (new kitchen, new flooring, new bathrooms, new A/c, new water heater, new roof)

Because my second property and the new 3rd (closing Aug11) are bought with a partner who is not interested in growth as I am, I dont think that he would want to go after a portfolio loan. I feel I'll be better off going after a commercial loan with a LTV 20%

So from what you are telling me the numbers Quicken is suggesting are decent for my situation? I hope they don't come back after the underwriting with a higher number, like they usually do...

Marcela Correa · Answer

Hi Pavlos,

Congratulations for having completed multiple deals! It's even more impressive as it sounds like you are relatively new to the U.S. Cheers to making a new life for yourself!

Now for your question. To get better advice, you should provide: the acquisition and rehab costs, if any, of the new deal and the current value of your first investment property. This way BPers can opine on alternatives. On the surface, the Quicken loan sounds like a sweeter deal than any rates I've seen for hard money lenders and probably most private lenders. Maybe a portfolio lender will allow you to aggregate the equity of your existing properties to use as collateral for future deals. Thru this type of bank you may be able to get a loan comparable to the Quicken one but you'd be building a relationship with a bank that can help you expand in the future. You can do searches on BP to learn about portfolio lenders (also referred o as community banks).