Real Estate Investor · Oklahoma City, OK · Member since 2008 · 22 posts · 0 votes
I just received a call from my banker telling me that this policy would be effective on June 29 2008. This really slow down a lot of new investors like me. Does anyone know if this applies for the whole lending industry?
Most major mortgage lenders, like BOA, are requiring 20% down on investment properties. In general, lenders have been tightening lending standards across the board.
Oh, it will be back. Anyone rememebr the world savings 40 year, neg am, 0 down, loan back in 1986-1991. I think they called it someting else.
I can't wait to see what the next generation of "I can't believe it's not better" loans will bring. The corporations job is to suck as much money out of the public as possible. The consumers job is to protect the fruits of their labor. Some where along the line we stopped teaching money in high school. There is a whole new generation of money stupid people getting ready to buy houses in the next craze.
I always put 20% down anyways so it actually makes me kinda happy because now I know that there will be less people that will qualify so it'll make my offers stronger.
Oh, it will be back. Anyone rememebr the world savings 40 year, neg am, 0 down, loan back in 1986-1991. I think they called it someting else.
I don't recall that specific loan, but I do recall 17% interest rates in Houston in the early 80's. Negative am was pretty standard. Up until about 1986 when things went completely belly up. I don't think anyone called it "jingle mail" then, but that's exactly what happened. Especially in TX where lenders had little recourse.
The only problem with that article is the percentage given is from 2001. A lot has changed in 7 years. I almost wish they did a census every 5 years. It would make it easier for those who study demographic trends.
I think the down is really a function of the debt service coverate ratio. Most bankers (regional banks in cali) I'm talking to tell me they don't want to touch anything under 1.20 - this actually often means more than 20% down for investment properties here in cali, but I think you can find some gems that have a better ratio.
That said, BofA traditionally has never been hungry for any kind of business, I rarely work with those guys when you have all the regional banks that really want to earn your business...
It's not a new program; it's the same ol' FHA 203(k) rehab loan that's been around for a long time. I used to originate them when they were available to investors. Investors brought a lot of fraud into the program; now they're available only to owner occupants.
Unfortunately, at this time, they're available to OO only. When I was originating (literally) hundreds of these loans for investors--I used to wheel them around the office on a dolly!--they were cumbersome for the investor because they're full doc only, but they were cheap compared to hard money loans. The borrower must front the cost of repairs and then be reimbursed from the rehab escrow account at each of the five draws allowed.
I think, with the current mess, they'll bring back the 203(k) loan for investors, but with more oversight features to (attempt to) avoid the fraud associated with investor loans.
By the way, the news is that 50 new FBI agents have been added to a task force in Southern CA alone to address mortgage fraud.
I'll look it up, but I don't think the 203(k) has re-opened for investors. Yes, you can borrow up to 110% with a 203(k) but that's for owner occupant only.
I heard a statistic at our REIA meeting last night. It was "less than 3% of the homes in the Denver area have any equity". It was over the course of a discussion about lease options for acquiring property. Now, I can't at all vouch for the source of that statement. Maybe a totally out of the air number.
I know for a fact that the 203(k) program is closed to investors. I'd try to find the Mortgagee Letter that addresses this, but that would take time I really don't have right now. You may be able to find it yourself here...
The definer of this program is (from your excerpt):
When the term 1-4 units is used, it means 1-4 units IN THE SAME PROPERTY, not up to four separate properties. See the distinction?
If an investor tried to get more than one 203(k) loan and declared that he was going to live in each property covered by a 203(k) loan, he would be committing loan fraud; specifically, occupancy fraud.
The 203(k) program is currently closed to investors, but can be used for owner occupants purchasing ONE property consisting of up to four units, also known as a four-plex.
An investor, if he doesn't already own a home, can declare that he's going to occupy the property but multi-unit properties are very susceptible to post-closing audits to make sure the mortgagor (borrower) really lives there.
Here is the FHA information and I remembered where it came from. An e-mail from a close associate from Keller Williams that works almost exclusively with investors here in CA.
There is a great FHA loan program allows remodeling or repair cost to be financed with the purchase.
Just 3 % down
1-4 units (at least one needs to be owner-occupied)
Loan amounts up to 110% of current appraised value.(up to $729,750 for single units and $1,403,000 for 4 units)
Up to 6% of closing costs can be paid by the Seller.
Available for new purchases or refinances