Is 100% LTV financing real, or a scam?

Question

I've been contacted by several lenders recently offering up to 100% LTV Financing, but it seems too good to be true.  I've attached two examples of the emails I've gotten.

Is 100% LTV financing even real, or is it all a scam?

Andrew Postell · Answer

@Dustin Carr thanks for posting here.  I always suggest with working with lenders/vendors that other real estate investors suggest or have worked with.  That way, you know they are pretty legitimate.  There's always exceptions of course but going with a referral from someone you know, who is an investor, is usually a pretty safe path.

Now, the 100% LTV question is a little....well, it can be misleading.  For example, are you buying "on market" or "off market"?  I have heard lenders say "we can lend 100% of the purchase price"....and that's not what I want. Because I'm usually buying a property using the BRRRR method.   I want 100% of the purchase price and 100% of the rehab costs.  The threshold that I want is 100% financing at 75% of the ARV.  Meaning that the lenders I use to take down my own properties lend me 75% of the ARV.  Sometimes I need to purchase and rehab at 80% of the ARV....and then that means I need 5% down payment.  And that's still ok.  But lending me 100% of that purchase and rehab, not to exceed 75% of the ARV, is the normal lender I want to work with when purchasing a BRRRR method property.  I don't buy properties at full market value BECAUSE the downpayment amount is too high.  So I don't buy properties that are "on market".  Can you buy a property with zero down?  Yes, as long as you are BUYING and REHABBING at 75% of the ARV (and working with those lenders that provide that type of a loan).  I hope all of that makes sense but feel free to ask anything additional.  Thanks!

Keven Kelley · Answer

Andrew,

Thank you for the thoughtful reply. I have about $30k available for a down payment at the moment. I also have good income so I'll keep saving. Eventually I will have enough for a down payment in my area.

I can't really do the house hacking because I already have a home that I plan on living in until my daughter goes to college.

Nothing I can do about lack of experience until I get an opportunity to gain experience. I did some minor stuff in my previous home such as replacing floors, doors, and trim. I've done plumbing and electrical but I've never done sheetrock, for example.

I'm new to this website. I'm going to explore a bit and see if I can network to find potential partners.

Thanks again.

Andrew Postell · Answer

@Keven Kelley hmm, ok a couple of things here:

1. You can't be broke and invest in real estate.  It just doesn't work that way.  Even if you had a good lender that did lend you 75% of the ARV...you still have to make payments to them.  And turn on the utilities.  And you'll have closing costs.  And reserves.  And etc, etc, etc.  Even on the best of deals I have had to come out of pocket $15,000 - now I got it all back on the REFINANCE step but I have to have assets.  Have to.  If you don't have about $10k-$20k then that means you would likely need to partner with someone to get a deal done.

2. Experience - I have seen some lenders say "if you don't have experience then we'll only lend 70% of the ARV".  And that's somewhat normal and understandable too.  I know, I know...how do I get a job when I don't have experience when every job requires experience? It's the ol' "Catch 22".  It doesn't mean that it's impossible though.  It might mean that I have to think about a different route.

Something to think about:  I'm not saying you should 100% go this route but at least think on it some - when I buy my own primary home I only need 3.5% down (and sometimes less).  My commitment is to live in that home for 1 year...and then I can rent it out and buy another primary home.  And every 12 months, I buy another and another and another.  Now I don't have to have any contractors or rehab or experience or anything.  But then when someone asks me if I do have experience, I have 1 or 2 properties now.  I can answer that question differently.

Again, not saying this is the way you should go...but there's lots of different ways of doing this.  Just something to think about.  Let us know if you have any other questions. Thanks!

Dustin Carr · Answer

Thank you, Andrew, for the thorough breakdown there - that was really helpful for me to understand.

Reid Chauvin · Answer

@Dustin Carr - 100% LTV Financing is very real, though the offerings are generally niche (veterans, rural development, physician loans). Those two emails seem pretty bait-and-switch though.

Logan McKay Zylstra · Answer

I would say that it is a scam. I've gotten the same emails.

Keven Kelley · Answer

Andrew,

do you any lenders in mind? I'm in a situation where I have good income and credit, but lack a lot of capital. In my area I can't always afford significant down payments. I haven't been successful at finding lenders willing to fund 100% of purchase and rehab as long as it is less than 75% ARV. Because of this I'm looking out of state for my first deal.

Dan Maciejewski · Answer

When it's not a conventional product like mentioned above (VA, medical/doctor loans, etc.), it would usually be a double loan product, where you get a first and second mortgage at the same time.  Generally I see the second purchase money mortgage being higher rate and much shorter term.  It has helped with some jumbo products a few years ago but I haven't seen anything like that fly around me in a few years with all the extra cash coming in.

Dustin Carr · Answer

Thank you all - the gmail accounts and follow-up emails lead me to believe it was more of a scam, but one can always hope! haha.

That said, if anyone has options better than 10% LTV they would like to direct me to for Single family up to 4-plex's, I'd love to hear how you do it.  For example.  Has anyone done a BRRRR with a bridge loan at 100% LTV and used it as a Short Term Rental?

Sean Ross · Answer

One lender I work with offers 100% LTV, but the minimum is $10,000,000 for non-owner occupied residential. Not sure the gmails are working within the same idea

Is 100% LTV financing real, or a scam?

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