All Forum Posts by: Sasha Mohammed

1) you get a partner who's willing to put up the down payment. no (reputable) lending institution would stick their neck out like this without some skin in the game from you. but a partner might be willing to bridge that gap for the both of you. or you could explore private money (someone you personally know) who might be willing to do the financing for you and take on a little more risk than an institution would be. 

2) totally reasonable and do-able. just be cautious of property tax reassessment in switching title from personal to LLC, some counties will hit you with this. Also, some lenders would consider this a sale. its always possible (albeit unlikely) they call the note due by triggering the 'due on sale' clause.

its a red flag, sure, but it doesnt mean its completely unobtainable. 'private money' on it's face is private. i'd loan money to a trusted friend or colleague today at 5% if it made sense and the risk was low, and i certainly would not charge my mother any interest at all :) 

what typically happens with these offers is that the verbiage is intentionally misleading. 100% financing would make one think they do not have to bring any of their own money, which is not always the case. There's also (as mentioned) rate buy-down options, where you are effectively pre-paying interest. your up front costs could be really high to obtain that 6% rate, but it doesnt mean its completely off the table. 

Scepticism is healthy in these situations. but i wouldn't go directly to "scam"... just know the right questions to ask and get to the bottom of really what is being offered here.

i suspect the hurdle may also have been that the LO wasn't ABLE to provide you a loan, and maybe a little ego sprinkled in. If you're looking in the $100k acquisition range, most lenders have a $100k minimum loan amount if not traditional financing (fannie/ freddie/ FHA). As opposed to just being honest, he may have just not wanted to say "its us that can't do it."

certainly not to make excuses for poor behavior; we as brokers and loan originators live and die by our customer service and referral business. but we are imperfect human beings. it could have been any number of things: personal reasons, immaturity, inexperience, ego... the list goes on. 

But i think the takeaway is that he was not the right fit for your needs, and that's okay as well. There are plenty of pros out there who would be ecstatic to work with you, and would work hard to make your deal work... or at the very least, kindly inform you if/when they can't help. 

as opposed to just outright saying its a scam, there are situations where this may be possible. 

notice how it says "up to" 100%... it may also say "starting at" 6%... It's an effective marketing tactic to get someone to inquire, and then they will adjust the terms accordingly. 

the low interest rate may be with maximum buy-down. the 100% financing may be referencing a fix and flip loan where they offer acquisition financing plus renovation funds in the form of a draw, combined equating to 100% of the property's value. this doesnt mean you wouldn't have a down payment or hefty up-front costs to obtain the terms stated. 

devil is in the details.

edit: i'll also add, if its too good to be true, it usually is. 

as others have mentioned, most lenders will allow you to use the cash-out proceeds for reserves. These lenders have different guidelines on how much is needed, and how much will be utilized from the cash proceeds. One, for example, will only give you credit for 50% of the cash out proceeds toward reserve requirement. Others might allow for all of it to be used toward reserve requirements. 

If you meet the respective guidelines without needing to provide additional assets, then yes! you're good to go!

as others have said, you need income is needed if you intend to occupy one of the units. you can use rental income to help qualify, but that depends on quite a few factors (loan program is one, present housing expense and landlording history are another). 

FHA has an added guideline on 3 and 4 units called self-sustainability or self-sufficiency (i always mix them up). basically it means that the rental income from the units have to fully sustain the PITIMI, or else its a no-go. Every lender does this differently. we have one for example that gives you credit for 3 units you're not occupying for this test, and another that will assign a value to the unit you are occupying for this test. the lender you chose matters. duplex does not have this guideline.

Fannie Mae just released a 5% down conventional product for 2-4 units as well, it will go live November 18th, 2023. still waiting on guidelines, but this could open up something for you as well. 

thanks for the tag @Alex Bekeza !

Just some food for thought - some DSCR lenders are better priced right now than conventional lenders on investment properties.

You might find this is a good opportunity to start shifting, leaving your 10-conventional open for future when rates get better on that side. 

You can close in an LLC with these loan types, and typically you can select your guarantor as well, depending on entity structure and lender requirements.

May be wise timing to at least look into it :)

a HELoan is a 2nd mortgage (its in 2nd lien position to your existing 1st) just like a HELOC.

HELOC stands for Home Equity Line Of Credit, its like a giant credit card where you can borrow and then pay back, and then borrow again. the key here is the 'borrow again' part.

HELoan is a Home Equity Loan.... its still in 2nd lien position, but you can only borrow against it one time. you cant go back and spend more on it even if you pay down the balance. that's what makes it "closed-ended" -- you cant continue to pull money out.

TD is trust deed. sorry for the nerd speak :D

 basically they are keeping their 1st mortgage as is, and then getting a 2nd mortgage behind it, specifically for the purpose of loaning those funds out. 

i guess my only suggestion if you intend to do this (aside from being really rigid in your vetting process) is maybe seek out a fixed rate mortgage. there was a post from another guy i read just yesterday that took out a 2nd HELOC (which was adjustable) to purchase a short term rental. now his payments have adjusted upward and he's asking if he should refi and consolidate. at least if your payment is fixed, you you have some stability.

you'd likely have better luck with a personal loan due to size.

alternatively, you can absolutely find private money lenders willing to loan you smaller amounts, but they will probably charge you quite a bit in fees and interest. 

you can also check out the classifieds section on BP! :)

GL