Minimum mortgage amount

9 Replies

What is the minimum amount a house can be mortgaged for? I was told 65k but that would mean I can't get a conventional loan for anything less than around 80k or so figuring in for subtracting the down payment. This can't be right. Please verify!! How are people supposed to buy properties listed for 50-70k range if this is true?


I live in western NY and want to get a conventional loan for a 2-4 unit.

Axos bank is awesome to work with. They have made exceptions and given me mortgages for slightly less than $50K after down payment (i.e. a $60k house). 

Make sure to call. The online system will say that they can’t do it. 

-Scott 

Also, forgot to add that they do charge a premium for “investor” (non-primary resident) loans ... I have credit around 730 and they give me a 5.99 for all mortgages through them at 20% down payment

Also, I believe the reason for the minimum is due to ratio of closing costs (lender fees) to mortgage amount. Once you get smaller and smaller mortgages the lender fees (closing amounts) don't really change and their percentage of the loan relative to the cost of property increases to "predatory" amounts? At least, this is my impression of the reasoning. For example, my loan for $48,000, I typically pay around $3,500-$5,000 in closing and lender costs... working out to be around 10% of the total loan amount. Whereas on a $100k loan it would be around 3-5%, not increasing in proportion to loan amount in other words. So they are inversely related. The smaller the loan usually the larger the percentage of loan costs relative to loan amount.

With private lender minimum property value of 75K and minimum loan amount of 50k on single property loan. Portfolio loan (2+ properties) minimum value of 60k.

Originally posted by @Scott D Burrows :

Also, I believe the reason for the minimum is due to ratio of closing costs (lender fees) to mortgage amount. Once you get smaller and smaller mortgages the lender fees (closing amounts) don't really change and their percentage of the loan relative to the cost of property increases to "predatory" amounts? At least, this is my impression of the reasoning. For example, my loan for $48,000, I typically pay around $3,500-$5,000 in closing and lender costs... working out to be around 10% of the total loan amount. Whereas on a $100k loan it would be around 3-5%, not increasing in proportion to loan amount in other words. So they are inversely related. The smaller the loan usually the larger the percentage of loan costs relative to loan amount.

 This is spot on. And the only way to get under those "predatory" limits ("QM test" is the actual name) is to start waiving fees etc. 

P&L. Profit and loss. 

P is determined by the amount of money lent.

L is determined by the number of loans.

A single $500k loan will yield more net revenue than 10 loans for $50k each. Same P, but the latter has literally 10x the L. They can make up for it, to at least break even, by bumping the rate or tacking on fees, but both have legal limits. 

Some lenders believe in Karma, and might do it just for that. Others do not. Some set the floor at $50k, some at $65k, some at $100k.

Listing agents on $50k properties will be able to provide a referral, since if they can't do that, they can't get their commission check. Give them a call, even if it's for a refi or something unlisted, just hop online and find the listing agent on a $50k listing.

As a landlord, you can think of unit numbers. Do you want a single unit at $2k/mo, or 4 units at $500/mo each? Assume each home sells for the exact same price and everything else, they are right next door, the only difference is just one is a SFR pulling $2k/mo and the other a fourplex pulling $500x4/mo. This is obviously fiction, that's not how it plays out IRL. But if it did, you'd look at the 4 sets of kitchens and things that need to be fixed, four sets of excuses why rent is late v 1, etc, and pick the SFR since you'd rather have $2k/mo with 1 kitchen to maintain, than $2k/mo with 4 kitchens to maintain.

Do the same limits apply to refinancing? I have a deal right now that is for sale for $25k with an ARV of $60k. Would I be able to BRRRR that property? I would want to refinance $45k.

Yes @Matt McGuire , the same thing applies to refinance loans. If you wanted to cash out it would have to be a institution loan. HELOC's do not have that requirement though. That would probably be your best bet for taking money out of the property.