Rental Property Investor · Austin, TX · Member since 2015 · 280 posts · 176 votes
In the spirit of the 2% rule, let's say I found a property with a rental rate of $1,400/month, appraised at $125,000 and selling for $97,500. Since the loan to value ratio presents natural equity in the deal at 78%, will Lenders (or a specific type of lender) consider this and not require any loan down payment assuming the borrower has excellent credit? I am very curious as to how this would work. Thanks!
Real Estate Investor · Burlington, VT · Member since 2010 · 2k+ posts · 1k+ votes
11y
@Account Closed
Chris is spot on - they will use the lower of the appraisal price or purchase. If you buy it for $97,500 it's now worth....$97,500, the amount someone was willing to pay for it.
Investor · Fort Collins, CO · Member since 2015 · 304 posts · 112 votes
11y
Larry,
Regardless of what the Appraised value is at, they are always going to fund the loan based on the lower of either appraised value and agreed on purchase price. In addition, depending on the bank, you will have to hold the property for a minimum of 12 months in order to refinance your capital out of the property. Most banks will lend on LTC as compared to LTV for the 12 month period, largely due to Fannie and Freddie regulations. Cheers!