100% LTV NOO LOANS!!!! (Non-Hard Money)
Most real estate books and courses all take about 100% LTV Non Owner Occupied loans. So it is not a surprise that on the message boards you find a lot of messages looking for these programs or questions about them.
First off they do exist! But are you sure that you understand how they work?
But before we get to deep lets get a very important term straight. LTV or Loan To Value, conventional lenders use the lower of purchase price or appraised value to determine LTV.
They are usually two loans one for 80% and a second for 20% of the LTV. This gives you a CLTV (Combined Loan To Value) of 100%.
The first loan will have a lower risk so it has a lower rate. The second loan has a very high risk to the lender so the rate is very high. The “Blended rate” usually works out to a reasonable rate. Not a low rate but a rate that will compensate the lender for taking the risk. Part of this is off set due to the fact that you will not have PMI.
One of the reasons that investors want these loans is they don’t have a down payment. Well you will still need some cash to get one of these loans. Most limit the seller’s contributions on closing cost to 3% of the loan amount. So you will need to come up with enough cash to cover the cost that exceed 3%.
Most also require 6 months worth of reserves in seasoned cash. This means that you need enough CASH to make 6 months worth of payments. This will usually work out to 5 to 7% of the loan amount. You will have to show where this cash came from. And a cash advance on the credit card is not a good answer.
Good credit is required to get these loans. I used to spend a lot of hours looking for 100% LTV NOO programs for people with lower scores. Any time I found one for FICO’s below 680 the rates made Hard Money look good. At least Hard Money requires very little paper work.
Speaking of paper work, be ready to show full documentation. Stated or no ratio on these loans jumps the rate.
Watch for prepayment penalties. It is very common for the lenders to require a prepayment penalty.
You will also need enough income to keep the DTI numbers in line.
The good part is that you get to keep the cash that you have on hand. You do not have to put it into the next deal. If the property will cash flow using this program use the cash flow to build your reserves up to do another 100% loan. Until you max out on the number of 100% loans that you can get.
Hopefully by that time the value of the first few deals is now high enough that you can refinance them at less than 90% LTV. This will lower your interest rate down closer to a market competitive rate increasing your cash flow.
So 100% LTV NOO loans are not easy to get and they are not cheap. But when used correctly they can help you acquire a few properties without using up all of your cash.
see I'm just the opposite. I have the cash reserves to show the six months, and rentals are popping in this area so having a positive cash flow even on 100LTV would not be difficult. Not to mention that I still find sellers sacrificing homes at 80-90% of FMV enough that 100 looks real attractive.
so where are they?
I have 2 lenders who will do 100% NOO loans, one of them you are looking at a blended rate of about 7.5% with an extra 2 to 3 thousand in closing cost, the other lender you are looking at a blended rate of about 8.5%(both are 80/20s) I am a mortgage broker in Oregon, but I can represent clients in all 50 states.
I AM LOOKING TO PURCHASE SOME INVESTMENT PROPERTY IN FLORIDA AND I WOULD BE INTERESTED IN TALKING TO YOU ABOUT FINANCING OPTIONS. DO YOU HAVE ANY LENDERS THAT ALLOW ME TO RESELL QUICKLY <1YR?
I am looking to do a refinance to take cash out of 3 multifamily properties. However, on my tak returns, the property depreciation makes my income look low. Does your bank look at the income before depreciation or do no doc loans based on credit only?
excellent explanation lacashman! now i know that i shouldn't spend time looking for those.
I don't want people to think that they should not look for them. But I want them to understand how they really work.
James
This is true that its hard to get this type of loan. Problem is they take a longgggggg time you have to have really good scores and a lot of liquid assets to impress this kind of lender. They actually have to sell this loan themselves to a investor once they get it. You need patience and a long expiration on a contract to deal with this loan otherwise.
Those loans are also a mine filed in case the market turns south. In situation like that, you end-up with the property that worth less then what you've paid for it.
Hello DJGROSSE,
I woud like to friendly remind you that this site doesn't allow the exclusive use of caps in the members posts. BTW, the 100% LTV are quiet risky right now considering that even a slight change in interest rate may cause the reduction in property value. Finding a cheep deal is what you want to look for so you do walk in equity when you take over the property.