819 score and can't get a good mortgage loan

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819 score and can't get a good mortgage loan

Diane Trotter
Little Rock, AR · Member since 2014 · 121 posts · 27 votes

Can someone explain mortgage financing requirements in this case

1.  I am trying to buy 6618-6620 West 30th (called 2 on a lot but I thing they are separate lots)

2.  I wanted to put 10% or, if I had to, 20% down and consider it a 2nd home

3.  Colonial Financial told me I'd have to put 25% down because

     I have a primary residence and a rental property

Owner accepted offer of $95K on $99.9 listing

My score is 819 out of 830

I owe no one accept my Costco that I pay off every month

Why can't I get a loan.

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Joel OwensBusiness Member
Moderator
Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes
10y

Try different lenders. Why not just buy it as an investment property and have the seller carry back a 10 to 15% second loan? This way you are only putting 10 to 15% down.

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  • Shaun Weekes
    Loan Officer / Processor / Life & Health Agent · Rancho Cucamonga, CA · Member since 2014 · 1k+ posts · 757 votes
    10y

    @Diane Trotter

    Is this an investment property or a second home?  2nd homes are very hard to prove unless it's by a beach, close to relatives you visit often, close to a lake that you fish at or something like that.

    Is this a unit property or an SFR that has a granny unit in the back?

    1Reply
  • Wayne Brooks
    Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
    10y

    Well, it's an obvious lie if you're trying to buy a house in your same town, and call it a "second home".  Also, it's important for you to Know, if it's one property or two.  Two units, or two properties, would Never be considered a "second home".

    2Reply
  • Joel OwensBusiness Member
    Moderator
    Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes
    10y

    Try different lenders. Why not just buy it as an investment property and have the seller carry back a 10 to 15% second loan? This way you are only putting 10 to 15% down.

    Podcast Guest on Show #47
    NNN Invest53 Reviews
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    5Reply
  • Chris MasonPro Member
    Moderator
    Lender · CA · Member since 2015 · 9k+ posts · 10k+ votes
    10y

    Hi @Diane Trotter,

    If this is indeed a pair of single family residences, you should be able to find someone that'll do a pair of 85% LTV Fannie Mae 30 year fixed mortgages with concurrent closes. The only caveat is that 85% LTV investment property mortgages have very bad interest rate pricing. Still better than hard money or commercial, but it's literally the 'worst case' interest rate pricing of all scenarios.

    1Reply
  • Diane Trotter
    OP
    Little Rock, AR · Member since 2014 · 121 posts · 27 votes
    10y

    @Chris Mason

    Thank you Chris!  I'm considering walking away from it but will check into the 85%.  
    I'm hoping in a couple of weeks I might be able to offer $70 cash for both of them.

    Thanks again!

    0Reply
  • Diane Trotter
    OP
    Little Rock, AR · Member since 2014 · 121 posts · 27 votes
    10y

    @Shaun Weekes

    Hi!  It is my hometown, Little Rock, AR.  I go at least once a year.  The way it looks, it is probably 2 houses next to each other on different lots.  The seller said that there is a possibility of separting the lots later on.  

    0Reply
  • Diane Trotter
    OP
    Little Rock, AR · Member since 2014 · 121 posts · 27 votes
    10y

    @Joel Owens,

    Pregnant idea!  I've been looking online for creative financing.  I'm going to see if that is an option and what the rate would be.

    0Reply
  • Diane Trotter
    OP
    Little Rock, AR · Member since 2014 · 121 posts · 27 votes
    10y

    @Wayne Brooks

    I live in Fontana.  The home is in Little Rock, Arkansas, where I was born.  I go back at least once a year and plan to retire there.

    0Reply
  • Joel OwensBusiness Member
    Moderator
    Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes
    10y

    If you do seller financing try to get them lower on the rate. Example 4% fixed for at least 5 years, preferably 7 to 10 with a 30 year amortization (25 minimum).

    If you get a higher rate on the first loan then you could try and get the first 2 years interest only from the seller to boost cash flow until larger rental increases kick in.

    When you ask one lender to go to a higher LTV like 80 to 85 the rate tends to be much higher as they see more risk with their position and exposure with the property. This is why a high single LTV loan or one where you ask a lender to provide a first and second loan the blended rate is much higher. With owner finance you are trying to blend the rate down between the first bank loan and second owner finance loan to your advantage.

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    3Reply
  • Diane Trotter
    OP
    Little Rock, AR · Member since 2014 · 121 posts · 27 votes
    10y

    @Joel 

    @Joel Owens 

    Thank you!  My realtor is checking into the possibility with the seller.  I'll let you know what happens.

    1Reply
  • Diane Trotter
    OP
    Little Rock, AR · Member since 2014 · 121 posts · 27 votes
    10y

    I just asked lender about

    1.  Refi-ing mortgage I already have with them so I can pull some equity from current property

    2.  Cost to process the loan

    3.  How much I will have available for purchase of the new property

    0Reply
  • Sean Sullivan
    Investor · South Portland, ME · Member since 2014 · 21 posts · 25 votes
    10y

    In my experience it is the mortgage industry standard to require 25% down on any investment property. (Yes, I do realize there are ways around this, but it doesn't seem you are pursuing non-conventional options.) 

    Given that you already have two properties (even though one is primary), and you have not indicated that this property would show any sort of monthly cash flow, I would not expect your excellent credit score to change the lending criteria of a minimum 25% down payment. 

    They are likely also considering your Debt-To-Income ratio. If taking on this third mortgage will lead you to exceed industry standards, that would be another reason your application would be denied. 

    1Reply
  • Jim Adrian
    Architect · Papillion, NE · Member since 2015 · 1k+ posts · 840 votes
    10y

    @Diane Trotter

    Random thoughts...

    Is your income too low to support this new loan? 

    Can you show a profit based on 2 yrs (banks want o see 2 yrs min) of tax returns from your other unit?

    1Reply
  • Keith Weigand
    Rental Property Investor · Cleveland, TN · Member since 2015 · 176 posts · 58 votes
    10y
    Jim Adrian same question as Jim. If it's a 2nd home, they rely on your current income to pay for the mortgage. If you purchase as investment property, you probably can show the signed leases as additional income to cover the mortgage. I have a "2nd home" in Clearwater but I rent it to my mom.
    1Reply
  • Rosston Smith
    Investor · Warner Robins, GA · Member since 2015 · 1k+ posts · 490 votes
    10y

    See if you can get a viable co-borrower to sign with you.

    Boom, problem solved until you develope more in the future.

    0Reply
  • Diane Trotter
    OP
    Little Rock, AR · Member since 2014 · 121 posts · 27 votes
    10y

    @Sean Sullivan, I wasn't denied.  I gues I, rookie, didn't know 25% was industry standard.  I was attempting to purchase as 2nd home.

    @Jim Adrian The rental of one of the houses is $800 a month.  The rental on the other is $500.  I plan to let my sister pay there and pay rent.  This is long range planning because I always have to help my family.

    @Keith Weigand It is listed in such a way that I thought it could be considered a multi-unit property.  However, it is considered 2 separate properties.

    My realtor originally wrote the estimate up based on 3 1/2 percent down.  That looked really good.  The shock came when I saw that I need $26,500 to close as opposed to something like $8K.  The property definitely will pay for itself.

    0Reply
  • Diane Trotter
    OP
    Little Rock, AR · Member since 2014 · 121 posts · 27 votes
    10y

    At this point, I am checking into a HELOC on my other rental property in Little Rock. This may be the answer.

    I will compare the previously estimated monthly mortgage payment of $829 to the

    1.  $563 (based on 25% down) Plus

    2. ? monthly HELOC payment

    If the total is around $829 I should be doing pretty well...I think.

    0Reply
  • Diane Trotter
    OP
    Little Rock, AR · Member since 2014 · 121 posts · 27 votes
    10y

    @Rosston Smith  I learned my lesson about co-borrowers 35 years ago.  Never again!!!  The problem is not qualifying for the loan.  I already qualified.  My problem is the $26.5K downpayment.  As I get use to the idea and work through other things it may not seem like a bad thing.

    0Reply
  • Rosston Smith
    Investor · Warner Robins, GA · Member since 2015 · 1k+ posts · 490 votes
    10y

    Try refinacing your current home in that case?

    0Reply
  • Diane Trotter
    OP
    Little Rock, AR · Member since 2014 · 121 posts · 27 votes
    10y

    @Rosston Smith, I'm keeping my personal residence out of it because it belongs to my husband and me. My investments in Little Rock are mine alone. I set up an LLC and, for some reason, the lender doesn't want to put the loan under the LLC. I've got to check into that more also.

    0Reply
  • Jim Adrian
    Architect · Papillion, NE · Member since 2015 · 1k+ posts · 840 votes
    10y
    1Reply
  • Stanci March
    Rental Property Investor · Lawrence, KS · Member since 2016 · 84 posts · 20 votes
    10y
    I would not try to tell the bank it's a second home and then rent it out. So many bad things could come of this.
    2Reply
  • Diane Trotter
    OP
    Little Rock, AR · Member since 2014 · 121 posts · 27 votes
    10y

    @Jim Adrian, I basically evicted my sister in April.  She was trying to move her boyfriend in without me know.  I got on it instantaneously.  I told her her had to GO!  She chose to go with him.  Her adult children are still there.  They have disabilities related to her irresponsibility.  They aren't going anywhere.  I go home all the time and would be able to stay at the smaller house I plan to buy.  The larger house will pay the mortgage.

    @Stanci March, How much time do you have to spend in a 2nd home for it to be legit?

    I appreciate all of you walking through this with me.  Thank you!

    1Reply
  • Hugo Aguillon
    Investor · Pampa, TX · Member since 2015 · 27 posts · 10 votes
    10y

    I would try another bank. I had a similar problem where i was told i needed 20% down since it was an investment property (most banks require this much down). However, i managed to find a local bank who was able to give me 5% down payment for conventional. I just had to show proof of funds worth up to 6 months of payments in my bank. Never stop looking for those banks that actually work with you and help you find a way to get your loan. They are out there!

    2Reply
  • Diane Trotter
    OP
    Little Rock, AR · Member since 2014 · 121 posts · 27 votes
    10y

    @Hugo Aguillon, I am checking through eLender now.

    0Reply
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