Mortgages under $50,000?

Question

Are there lenders that will offer residential mortgages for less than $50,000 to prospective homeowners  ( not investors) and if so what t  terms are offered?

Michael Lauther · Answer

@brian I agree that the lack of financing is not the driving force and Mark H. you are right also that this lack is in a sense a kiss of death but thats my point. I invest in a neighborhood where prices have dipped into the high 20k to 30k range for properties that sold in a poor economy for 45- 50k and more. Dayton experienced a downturn in an economy that had already had a downturn.

the upside is that there are families that have lived in this community and are paying rent for a 2 bedroom of $550 and 3 bedroom $625 to be near parents, grandparents and other family members. The median income is low in this area but so is the cost of living. It is a good community in the City of Dayton and while I buy and rehab as many of these properties as I can because it is profitable, my point is these good folks could be homeowners for what they pay in rent.

I still believe that home ownership is a positive outcome for families and the community. Right now only cash investors can afford to operate in this market. That is not a good thing for the community.

Derrick W. · Answer

I used Garrenty bank in Bryan Texas for a 32k loan. ( after a big down payment) I'm VERY happy with them.

Michael Mullins · Answer

Does anyone else have a Credit Union / Bank that will loan in Texas for under 50k, I found a property for 48K worth 80K I want to pick up. But I'm finding it hard to find a bank to write the loan.

Michael Lauther · Answer

Brian Hoyt you make some interesting points. I agree that many investors will do the minimum. necessary to get by. I have 4 houses on the same block and my farm area includes sections that have sold for 35k - 40k and more. I intend to continue to buy properties on this same block. I see many people who would like to remain in the area and a price point of around 40k would enable a young family or a retired couple to maintain a very manageable home in a highly affordable city. For now I am content to buy properties fix them up and collect the rent.

Bill Gulley · Answer

It does make it hard for someone, say a single person, who only needs a small 4 room house at 25K, this is an aspect that should have been addressed in the SAFE Act, IMO, as the costs of sale can be too much for entry fo a buyer.

James H. · Answer

Its an interesting phenomenon to watch. Once cash investors are the only people who can invest in an area, the hope for a turn around is very far off IMO. Most cash investors (not all) in these areas do the bare MINIMUM to keep life in a property and they treat it more like a car note than a real estate investment. I bought a cash rental and turned it into a real house with central HVAC and it is still quite pofitable kicking off 275/month using the 50 percent rule. Some investors across the street bought these duplexes and are just barely kicking them to life. They will have better profit margins than me, but there properties suck. It kind of stinks because I feel for my tenants who would probably rather live across the street from the vacant duplexes than live across the street from who is likely to move in. I wish I could have bought those duplexes, but it would have cost a lot of time and money I just didn't have at the time to bring them up to my standards. I was hoping they would get condemned and dozed...

So, with cash investors keeping properies barely scaping along, the neighborhood will have a very tough time going up in value based on its own merit.

In regards to the bank loan, I believe 30K is about the magic number simply because most lenders have set origination fees that become to high as a ratio to the loan amount, at which time usery laws will not allow them to make the loan - unless they lowered their fees, which they generally won't.

Please keep in mind when I talk about cash investors I am not inlcuding everyone. I am a good steward and I believe Michael Lauther and others are as well, but there are a lot of investors out there that don't care about anything but their %profit over the next two years.

Thomas Handy · Answer

I had a loan approval for $30,000 from Capitol One in December last year.  They may be another lender that could be available.

Tom

Mark H. · Answer

I really believe that in my market, the lack of financing is the "kiss of death" for otherwise recoverable neighborhoods.  When I began looking for investment properties, I was told by many bankers that they wouldn't touch anything under $50k, and I did pass up some deals because of it.  Luckily, I found a credit union locally that has better rates & lower fees, and they will write loans down to $30k.

Regular folks don't know enough to call 15 bankers to find the one that will actually write a small loan - they'll call two or three and assume they're all the same.

I guess the lesson learned is, if you're *selling* one of those properties, to suggest/refer the banks you know can work the smaller deals.

James H. · Answer

I am sure the market is depressed, relatively speaking, somewhat due to tighter lending standards along with other factors.

I don't really think that access to small mortgages is much of a driving factor though. In general, people who have the desire and wherewithall to get a mortgage are, for the most part, able to afford a bigger mortgage than 50K, even by lending standard of the early 2000's. Those retail buyers that can acquire a mortgage for 80K will, in most cases, not go for a 50K or under house.

Although, if a house was 70K and is now 40K (for example), not only do you have the low value deterring a retail buyer, there is the higher challenge in getting a loan - and especially a loan that small for the retail buyer still willing to buy.

Michael Lauther · Answer

Brian Hoyt Thanks Brian, I was beginning to think that these loans did not exist at all.

Do you think as I do that some markets are depressed precisely because of lack of financing for those who might otherwise qualify?

It sure makes sense to buy many of these properties for investors, and I am one who is capitalizing on these cash deals, but the neighborhoods would be better served if retail buyers had a chance to step up and  get their shot at the American dream.