Down Payents?????
During these times of tighter lending standards, is it practical to believe that a lending institution will allow a novice investor to purchase a rental property with NO money down if the property comes in well below the appraisal value. This is what I have been told, but I am preparing to have to put down at least 20% to avoid PMI. This may be a repeat topic, but one that need more insite from the board. Especially the novice investors. What have been your experiences lately??
THANKS, Chaz.....
Lenders mostly use the rule that they will lend X% of the appraised value or the sale price, what ever is lower. If you do a great deal and buy way under market the lender just assumes the real value is lower than the appraisal. Why would a seller sell for less than full value?
Maybe more correctly, the lender has a business rule to reduce the risk of fraud or a bad loan. Hence they really do not care if the appraised value is a lot higher as they will just ignore that fact to reduce the risk to them.
Some lenders under particular circumstances will lend on the value. Hard money, a lender who has offered a working line of credit to an investor, a lender who works for the tax assessed value, etc. Not very common but it does happen.
John Corey
I asked because some say they buy far below the market and can there for avoid having to put down money.
Why not get a 'piggy back' loan with a 2nd mortgage so you do not have to pay PMI?