All Forum Posts by: Tom S.

@Izzy Smith How much equity do you have in your primary house? You mentioned you recently purchased with an FHA loan, which typically would be 3.5% down. Usually (not always) you'll need at least 20% equity to get some cash out. Certainly you can force appreciation through upgrades, but they generally have to be pretty substantial. You may want to talk to an agent or bank in advance to see if the upgrades will give you the desired appreciation.

As others mentioned, you'll also have to run the numbers to see if pulling that money out with the fees involved is worth it.

@Sawyer Scott I've posted about this in the past, I've down the seller financed downpayment a few times (as a buyer), but lots of moving parts that have to come together successfully.

Most importantly, can't be done with a conventional loan. Mine was with a smaller local bank that held the loan "in house" (not reselling it via gov't guidelines).

I put down the 20% and the bank financed the 80% 1st mortgage.  At closing, the seller offered me a 2nd mortgage for 15% of the selling price, which I then used to reimburse myself 15% of the 20% down.  I put up the 20% with a 401k loan, so paid myself back and the only fee was a $100 admin charge from my 401k plan.

The key points: the bank will have to allow it, the seller of course has to agree, I had to have the 20% down first, the deal was good and my credit was good, so the bank felt comfortable with the deal.

@James Armstrong  James - also consider looking at seller financed properties which may allow you to put less down.  My very property was a seller finance for $80k, and he let me put down 10% (8k), and the closing costs were minimal at $1k.  So all in at $9k down.

@Matt Cruz  Great advice above and I second that.  A solid W2 job is the easiest and less expensive path to long term financing at the lowest rates.  Not just your first house hack but additional investment properties and refinances in the future.  The real estate as a side job is a great idea as well.

I'm in the tech industry as well, and have slowly built a great portfolio over the years, with at one time almost 10 mortgages with 3-5% interest rates for each.

Good luck!

@Reed Olson  Welcome to BP! Both of those questions are probably best suited to an attorney and a CPA / financial advisor that knows yours and your parents finances.  They would be in the best position to offer sound advice.

Good luck and congrats on the recent purchases!

@Wendell Butler A local bank in your area that ideally knows the property already would be your best bet. I asked around last year for my 5 unit commercial property but the terms weren't' great (and that was before all the interest rate hikes). Also, most would only loan to the 65% LTV range.

So with the numbers you posted, there's no lendable equity.  But call around.

@Jon Martin  The seller gets compensated by the interest on their loan to you, the buyer.  So if the purchase price is $200k at 6% for 30 years, and the seller is able to wait all 30 years to collect, they receive $231k interest on the loan.  Or $431k total.

The reality is that most sellers won't or can't wait the full 30 years, so most loans are amortized at 30 years but with a 5 or 7 year balloon payment (the balance is due in full at that time).  

I've done a number of seller financed deals as a buyer and those would be typical terms.  And the 0% down is very, very rare.  10-20% down is more common.

@Brian Meyers  My typical offer for purchasing using SF would be 10% down, 6% interest with 30 year amortization, balloon in 7-10 years if you can get that.  All of the above terms are negotiable depending on what the seller is looking for.  But I think that's a reasonable starting point.

Once you agree on terms, a good real estate attorney can handle the paperwork.

Other items you should do, property inspection and appraisal. The seller won't require an appraisal like a bank will; you want to make sure you're not overpaying.

Good luck!

@Andrew West Agree with the above posts, those are pretty good terms. 6.5% is the going rate on an owner occupied SFH, so the same rate for a commercial mortgage is good. 25 term is good too, for all of mine 20 years was the longest offered.

For other things to negotiate, points is an item.  Mine were all 0 points or 0.5, especially if you're working with a local bank.

Good luck!

@Candace Pfab  Good to hear!  I bought my most recent property in Feb 2022, when everything was spiking, and the appraisal came in $50k over purchase.  But the lender still used the purchase price for the loan.  

Separate note, I refinanced a rental property in March 2022 to lock in the end of the low interest rates.  The "drive by" appraisal came in lower than expected, so I asked (and paid for) a full appraisal.  That came in even lower, but the bank said they had to use that new lower appraisal.  They felt at the time the trend was downward and wanted to be more conservative.