Will banks loan o 90% LTV?

26 Replies

I'm trying to plan out my next buy, but my savings alone would take me forever to save for a conventional loan down payment. I did some amortization calcs on my current house loan and see that at the rate I am saving and with my equity increasing I could do it in about a year and a half under the assumption that I can get a 90% LTV. I have heard of rumor that some banks may do this. I'm in the Denver area, has anybody heard of 90% LTV's and if so who are they? Thanks!

Colin, the answer to your question depends on a lot of different factors... so you might need to clarify your assumptions. Based on your question, it is not just the LTV of the property you are purchasing, but its intended use, your personal credit, your debt to income ratio, and how your structure the deal.

For instance, if you own your current residence, and are looking to buy a new primary residence (and if your current mortgage + projected 2nd mortgage is less than 45% of your current income), then you can get a conventional mortgage. In some cases, you can get a 95% LTV and pay a mortgage insurance premium. If you buy it as a rental (and still want a conventional mortgage), then it is usually 75% LTV max if you go through a bank.

If you want to blow past all of these and buy a rental - you can put together private investors (who usually don't have hard requirements on an LTV...). The problem with the question that you are asking is that it is not about an actual deal. If you were looking to buy a house for $100k that was actually worth $500k (an absurd deal!), then structure the financing to maximize your own equity. The bank will only loan you $75k... because it is not tethered to the value of the property, but the purchase price. If you bought the property with a hard money lender (which would cost you $2000 and $10k/yr), but found someone who was willing to give you a 100% loan of the purchase price secured with the note of the property... you could hold on to it for 1 year and do a cash out refinance at a 75% LTV. So you could easily pull out $400k of equity to go do more deals!

Could you clarify your assumptions?

Hey John, thanks for the reply. I suppose I should preface all of this first with the fact that I am totally new to all of this. I bought a duplex in January, live in one half and rent the other (a house hack before I knew what a house hack was).

You're right, I'm not analyzing an actual deal, just doing a calculation of some of the things I would expect on a future deal. So let me get to some of your first assumption questions. The property I would be looking for would be a duplex to 4-plex, personal credit is just under 800, debt to income is very low. Income is fairly high, and if the bank accepted the rent I have been receiving then it would look even better. 

Based on looking around the Denver metro area, I'm assuming that I could reasonably expect a duplex in so-so condition to be around 300-350k. Given that it would not be a primary residence, like you said, 75% max LTV with closing costs starts to approach 100k down payment. Which I'm very far off of right now.

So to clarify my question slightly, I was hoping that someone would give me a HELOC up to 90% LTV on my current residence. This money, combined with my savings, may be able to get me to a point where I could have the cash for the down payment for a conventional loan on the property.

I guess the first question I should ask now is, does it even make sense to get the money for a down payment like that? If not, what are my other options? 

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@John Wanberg , I have a question regarding hard money. I have a deal in Aurora, CO. for $180K and I'm looking at a $270K-$275K ARV. My partner and I are looking to get a hard money loan for 90% of the ARV. My question is, what are some of the things I will have to consider when asking for that loan and what numbers will I have to be able to present? I am also very low on funds and I have very little experience. This will be my first buy. Sorry if this question is kinda off topic from @Colin Carr 's original post.

@Colin Carr I'm a lender in Denver, we don't do HELOCs so this is where I refer people: You can get 100% LTV HELOC on your primary residence through Credit Union of Denver, their rate is about 6% so your payments come out to $100 a month for every $10k borrowed. I think Key bank will go to 100% as well but their underwriting is a bit more strict.

@John Wanberg Is right. 75% is probably the max LTV you will get for an investment property. I've seen 80-85% but its been for customers that have done multiple loans through a small bank and they are comfortable with them.

Colin If you need extra $ for the downpayment on a 4plex have you considered a SDIRA or Solo 401k?  Good look in your investing!

@Thanarat Phuvapaisalkij , I am not actually the best person to ask about hard money lending.  I have never used it myself... I would recommend searching the forums though, because there is a lot of discussion on that topic. 

@Kreighton Reed , could you explain the SDIRA and Solo 401k for people who are not familiar?  Those are not really conventional financing vehicles. 

@Thanarat Phuvapaisalkij so hard money lenders want skin in the game. At 90% LTV it's a no go. Find a partner or private money person who believes in you personally.

@John Wanberg Add to the list from @Kreighton Reed Westerra Credit Union. I have found they have a generous desktop valuation model and with good credit will lend up to 100% of value as well. Not sure how they feel about a duplex as the primary residence. Won't know until you call.

Why not refi or put a HELOC on where you live now and then buy the next one as your primary residence. BRRRR

@John Wanberg Self Directed IRA's and Solo 401Ks allow you to roll over your 401k/IRA into a trust account or LLC and use the funds to invest in real estate (or gold bars for that matter). There are some really good resources on BP and some PRO members that are literally EXPERTS. 10 years ago it was unheard of, its been my observation that this sort of financing is becoming more mainstream as of late.

@Thanarat Phuvapaisalkij hard money lenders vary with their requirements so there are no hard and fast rules. At the same time, they lend money on the asset and want equity in the asset as assurance against losses. Typically they want 30% or more equity. There are different ways of slicing the deal and some will allow you to pledge other assets (mostly real estate with significant equity) to cover short falls in equity. In the end they get their protection (equity) or the don't lend. At 90% loan to value, just the time value of money and expenses of foreclosure and listing with an agent to resell after forclosure would put them in the hole even if they nailed every other aspect of the property. 

Originally posted by @Colin Carr :

I'm trying to plan out my next buy, but my savings alone would take me forever to save for a conventional loan down payment. I did some amortization calcs on my current house loan and see that at the rate I am saving and with my equity increasing I could do it in about a year and a half under the assumption that I can get a 90% LTV. I have heard of rumor that some banks may do this. I'm in the Denver area, has anybody heard of 90% LTV's and if so who are they? Thanks!

History shows that banks will even lend 100% or 110% LTV given track record, credit, a good deal, and/or good negotiating. Donald Trump purchased many of his early deals with little or none of his money down, and these were $200-400M buildings!

No, not typically. Not unless you're doing it for your primary residence.

Difficult to find HML over 80-85%. We need a gap to make sure that if you default, we can recoup our losses. Try private money from a PML or someone you know.

Originally posted by @Thanarat Phuvapaisalkij :

@John Wanberg , I have a question regarding hard money. I have a deal in Aurora, CO. for $180K and I'm looking at a $270K-$275K ARV. My partner and I are looking to get a hard money loan for 90% of the ARV. My question is, what are some of the things I will have to consider when asking for that loan and what numbers will I have to be able to present? I am also very low on funds and I have very little experience. This will be my first buy. Sorry if this question is kinda off topic from @Colin Carr 's original post.

90% of the ARV is going to be almost impossible to find. Definitely go to someone you actually know instead. Also, respectfully telling you that hijacking someone's thread is bad etiquette. You would have gotten better answers if you made your own post.

Hey thanks to everybody for the great advice. Its interesting to see all the varied responses. I'll have to check out all the suggestions and weigh my options. Thanks again for the insight! If any of you are in Denver and want to discuss real estate feel free to drop me a line.

Originally posted by @Thanarat Phuvapaisalkij :

@John Wanberg ,  I will have to consider when asking for that loan and what numbers will I have to be able to present? I am also very low on funds and I have very little experience. This will be my first buy.

 Wholesale the deal out assuming you have it tied up. I might be interested, and I'll walk you through everything so you'll know what to do next time.

Colin, depending on how long you have owned your primary duplex and how much equity you have built up, you may be able to cash out refinance your current home and invest that money toward the next place?  Just make sure your new refinance payment still allows you to cash flow and your debt to income ratio (after the new purchase) will be under 42%.  I am new, have only done one rental deal, but that is how I did it.  Interest rates are much lower now than when I initially purchased so my original mortgage payment didn't go up much even after the cash out refinance. If you financed your primary with fha and have been there a year and are willing to move, you might refinance the first into conventional, pull cash out and finance your second through fha (if you are willing to move into the second for at least a year).  The costs of doing the loans may be prohibitive if you don't already have significant equity built up.  Again, I am new, so definitely not an expert but I wanted to share the options I have considered :)  Best wishes!

I have a US Bank 90% HELOC on my primary residence. It is variable, but they have a 6 month teaser rate of 2% and then it adjusts to 4%. This is in Colorado btw. I do have excellent credit, so maybe that helped out as well.

@Luis Roel , thank you for bringing that to my attention. I am fairly new and young so I am just eager to get into conversations and ask questions. I'll make sure to not take over another person's blog in the future. 

@Matt M. , the deal is actually being whole sale to me and my partner. We are still looking at the numbers and are working with a hard money lender right now. 

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