Real Estate Investor · Memphis, TN · Member since 2008 · 86 posts · 1 vote
At my local REIA meeting, there was a sentiment from the more veteran players (particularly the mortgage brokers) that Fannie MAE/MAC will change mortgage allowance from 4 to 8 soon to help relief the number of foreclosures on the market.
Does anyone else have the same sentiment or has heard similar from their REIA?
The advantages are that you can obtain an unlimited number of loans; that you can buy directly with your LLC as opposed to personally (which saves an additional transfer later); that there is no PMI with commercial loans (at least as far as I know); that commercial banks are more flexible than residential loans; and that commercial loans can close faster than residential loans.
In addition, I'm not sure that commercial loans are much more costly than a NOO residential loan, although they're certainly more expensive than an owner occupied home loan.
All my properties are generally bought with commercial loans from small local community banks.
Advantages for me:
-Commercial loans are much cheaper as far as closing cost.
-Generally close in 2 weeks
-Able to use my appraiser
-The banker knows me and I can deal directly with him and often they can approve you upt o $250,000 in loans before going to committee. Its just a lot less hassle.
-Easier to Qualify in my opinion
-I can get interest only loans so I cashflow more on my rent to owns.
-My rates are about 6.5% for a variable rate tied to prime for any new loans. I have some loans as low as 4.75% interest only that were down before the bank raised the rates due to their margins getting squeezed. Still 6.5% thats about the same as a traditional residential loan for an investor.
-Loan doesn't appear on my credit report at most banks.
-Can get loans in my company name. Liability protection is important to me.
Don't get to excited about commercial loans though. They have dried up considerably just like everything else and their standards have increased on real estate deals since the bank regulators have tighten up so much.
MikeOH wrote: The advantages [of commercial loans] are that you can obtain an unlimited number of loans; that you can buy directly with your LLC...
If there's anyone still not quite clear on the distinction (residential vs. commercial), let me say again that one can use a residential (Fannie/Freddie) (as opposed to commercial) loan and purchase as many properties as you want in an LLC, as long as you can find a lender that will lend to an LLC. For example, Aurora Loan Services used to lends to LLCs (before it went under).
Kenneth,
For your fisrt post, it would be more appropriate to introduce yourself in the proper thread and tell us a bit about yourslef and your goals/experiences in the RE investment arena.
At any rate, the two lenders you are questioning are local to his area and not for National use. I will let Harrison finish the response if he chooses.
talked with two bank/mortgage lenders this am about the restriction on number of mortgages. Lender #1 checked and verfied restriction for investment purchases and second homes, not residential.
Broker #2 stated underwriting guidelines were to submit only requests by purchasers with no more than 4 mortgages but agreed he'd have to check that again to make sure.
I really believe it's 4 mortgages for investment purchases and second home purchases.
It is true that my commercial lender doesn't care about the number of mortgages; however, that could change and the terms are only 15-20 year balloons.
In the current lending environment, what you hear today, can change tomorrow.
4 loan limit IS the current limit with Fannie, but as several posters have described, there are one or two methods around this (or more accurately, avoiding Fannie all together)
Wow this thread went all over the place. I rarely come to this particular forum, but let me offer my opinion and a few facts to maybe clear things up.
First the original question. I'm not sure how these people are in the know or what they think. I'm active as a mortgage broker and deal with loan reps on a daily basis. I think this is wishful thinking. I have heard no rumors of this, other than wishful thinking investors.
This is more of a political question than anything. I would not expect anything until Obama takes office and even then it will take a while. New people will be taking over in almost all positions in the upper levels of government. These people will need to be confirmed by congress. Then they need to figure out what needs to be done with the credit mess. This would likely not be the first thing on their priority list.
Then there are political ramifications. Everyone wants this "housing crisis" to be over. Will the Democrats want to help out investors to do this? That is a political question. My belief is that why would they help out the investors (vultures) in their minds.
On a side note, every day I meet with someone I try to figure out a solution to this problem. This seems to be the number one problem I'm running into in the marketplace. The person who finds a solution to the four house problem has a fortune waiting for them.
I'm not even going to try to answer all the other questions and tangents that came up on this thread.
Two facts that might help:
A lot of the questions and facts in this thread relate to FHA loans. FHA is for personal residences not investment property.
You can get a residential loan or in some cases a commercial loan on residential property, but you can't get a residential loan on commercial property.