Combining Non QM loan with seller financing to buy a rental

[Michael Hyun]

So I just heard that there is this financing option where I can combine Non-QM loan for 50% of the purchase price, and then seller finance the 40%, and then down payment for 10%.

If I can get the 40% of seller financing at 1-2% interest, that would make a good deal a great deal. 

Pros:
- only 10% compared to 25/30% down payment. I'm looking to buy as much real estate as possible in the next 5 years so this is big.

- Much lower monthly payments

Cons:

- harder to find a seller willing to finance

- Having to deal with the seller? I'm not too familiar with seller financing. What if they want out?

Any thoughts on this?

[Andrew Postell]

@Michael Hyun so who did you hear that you can combine a Non-QM loan at 90% LTV with owner financing? I would go back to that person and ask them what they are talking about. I would be curious to know what lender is doing that as well.

[Chris Seveney]

@Andrew Postell

I agree sounds very unusual.

Also for owner financing finding a rate at 1-2% interest is going to be very unlikely unless the seller is very desperate to sell and the house needs a ton of work.

[Andrew Postell]

@Chris Seveney no joke I have seen a seller provide 0% before...sometimes people just get lucky and sometimes sellers panic.  While admittedly very rare, I think that lender is even more rare!  But maybe not....still interested to see who's doing that.

[Chris Seveney]

@Andrew Postell

I agree it has happened but as an investor I would try and see if I could get it but I would not base my assumptions / how much I can afford on being able to get a rate that low

[Michael Hyun]

Is it a 90% LTV if the seller carries 40%? I think he mentioned its a 10 year balloon on the seller financing at 1%. And yes, this is if the seller is more desperate.

Here is the video I watched.  50/40/10 loan video.

[Andrew Freed]

@Michael Hyun So you listen to Michael Zuber too? He's one of the most knowledgeable real estate experts on youtube.  I was planning on implementing a similar strategy if the seller wants a ridiculous price. I'm happy to give the price they want if they meet me in the middle in terms. I really don't care how much I pay for the house, what I truly care about is what my monthly payment will be compared to my rent / revenue. So yes, I'll be trying that too, 6-7% interest on the 50% note, 1-2% interest on the 40% note and 10% down. I'm a buy and hold investor, I look at a 5-10 year horizon hence "price" doesn't matter to me in the short term, its the fixed monthly payment that does. 

[Michael Hyun]

@Andrew Freed so the only caveat is the 40% seller financing part - that is not a 30 year loan, is it? I heard its a 10 year balloon - what does that mean exactly? 

Does that mean that 40% is amortized over ten years? If it is, then even at 1%, isnt the monthly payment for that 40% still realtively high?

[Andrew Freed]

Well you can negotiate seller financing however you see fit since it is an agreement between you and the seller so it all depends on the negotiation. I would negotiate a 30 year amortization schedule 1% interest. If you included a 10 year balloon, that would mean you would have to pay the entire balance of the 40% seller financing note at the end of the 10 year period hence you may need to refinance to pay that debt. 

[Jay S.]

@Michael Hyun: Have you heard of DSCR loans? They can be great options for investors like you who want to give less down payment and focus on growing their investment portfolio.

We do DSCR loans starting at 15% down payment and these loans don't care about your DTI.

DM me if you are interested and I can send the loan guidelines/matrix etc.