Loans under 100k?

Question

Hey Bigger Pockets  Fam,

Does anyone know of lenders that are willing to lend for properties under 100k? I am looking at some in the 60-80k ball park with little to know rehab needed. Anyone have a referral on a lender that can lend in that ballpark?

Omar Ramirez · Answer

There is a group of lending institutions that can provide financing for loans starting at $50,000 or an appraised value of $66,700 on 1-4 residential units with DSCR loans.

Furthermore, there are hard money lenders who offer purchase rehab loans without a minimum loan amount requirement.

However, it's important to note that these loans may appear to have higher costs due to fixed fees that cannot be reduced in proportion to the loan amount.

Christopher Trastoy · Answer

Hey Dallas,

I am just checking this message out. I would definitely like to talk about the products your have to offer.

Christopher Trastoy · Answer

Hey Jessica,

sorry for the late response as the user interface on bigger pockets is still new to me. I appreciate the feedback. I own (2) investment properties and actively seeking 3rd. I am not sure that I am ready yet to start seeking other investors to join in.

Mike Klarman · Answer

so, DSCR loans for properties under a 100k is just a dead market right now and if you find someone you will not like the terms.  The lender doesn't make anything on them.

Now, you can pick up a 75k house and put 40k into it.  That you can do with a bridge loan, but as long as the total loan amount is 100k between purchase and rehab.

Dallas Sauer · Answer

My minimum is 50k if you need help.

Jessica Stevenson · Answer

@Christopher Trastoy - Have you had success in investing before?  Make sure your sphere of influence (the people you know/like/trust) know what your doing and what your goals are! You'd be surprised at how many people would be willing to lend money for a decent return if it's to someone they trust doing something that they also believe in, in an area they're comfortable with :) Dont be afraid to talk about yourself!  Go to some local networking events and ask around there as well.

Brittany Minocchi · Answer

Hey @Christopher Trastoy, I have a lender that'll go down to $55k as long as the property is worth at least $75k. I'm guessing you mean $60k-$80k purchase price - if so, you'd want to stay in the higher end of that range. Keep in mind that most of the closing costs are a set fee, so it'll look worse for a $75k loan than a $750k loan. Expect to pay about ~$5k in origination, underwriting, processing and doc-type fees, in addition to title fees and escrows.

Stacy Raskin · Answer

You can get a DSCR loan with a $75K appraised value down to a $50K loan amount if the appraisal will come back "as is" meaning there are no significant repairs or they're are addressed before the loan closes. So this has to be a property that someone can live in and not a "before" of a fix and flip. The lenders I've heard of that do these types of loans require a 680 middle FICO mortgage credit score. $100K loan amount and above requires a 620 middle mortgage FICO score but rate pricing gets better as the credit score goes up.

It's the same work to do a $55K loan as a $500K loan so the fees will be higher due to the loan amount but will still be much lower than what a lender or broker gets paid on a higher loan amount.

DSCR loans won't use your income to underwrite the loan.

DSCR loans are based off of down payment, credit score and either actual or market rents so it helps to supercharge an investor's real estate goals and net worth. Here's a bit more in detail about how rates are calculated for DSCR loans:1. Credit score- the higher the best. 760+ generally gets best pricing for investment property loans with most lenders2. Loan to value ratio: The higher the loan to value ratio (LTV) is, pricing takes a hit. So your pricing will be higher for a 80% LTV loan than for a 60% LTV loan.3. Prepayment penalties- usually 1-5 year terms. The shorter the prepayment term has an impact on increasing the rate.4. Are you cash flowing the property? More on how that is calculated below. Is your DSCR ratio greater than 1-meaning are you cash flowing (according to the lender's criteria of mortgage, property taxes and insurance (and HOA) if applicable). Many lenders will not do a DSCR loan unless cash flowing. If they will do a loan with less than 1, the pricing takes a hit. This criteria is for 1-4 and 5-8 unit programs. I've included an example below to help illustrate this.So different lenders have different rates (which do vary even for DSCR loans) but these are factors they all consider.See example below:DSCR < 1Principal + Interest = $1,700Taxes = $350, Insurance = $100, Association Dues = $50Total PITIA = $2200Rent = $2000DSCR = Rent/PITIA = 2000/2200 = 0.91Since the DSCR is 0.91, we know the expenses are greater than the income of the property.DSCR >1Principal + Interest = $1,500Taxes = $250, Insurance = $100, Association Dues = $25Total PITIA = $1875 Rent = $2300DSCR = Rent/PITIA = 2300/1875 = 1.23DSCR lenders generally let you vest either individually or as an LLC. It's a great way to increase your net worth and these loans can also be used to pull cash out of a property as it appreciates allowing you to reinvest money into new deals.

Loans under 100k?

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