100% Financing Or No Money Down?
I'm new to the real estate investment game. I have a house 330k FMV with 220k mortgage and very little other debt - no car payment, just essentials.
I apparently qualify for 100% financing for investment property, but am told that I might be better off paying something down out of pocket.
What are the advantages / disadvantages of 100% financing?
100% measn higher interest rate and higher cots for the loan....Lenders want to team up with you and know that you also have something to lose if the deal goes south....There are 100% deals but usually they are 80%/20% or maybe 90%/10% so you are paying for 2 loans (in most cases).....why not get a HELOC on your home to hav some money to put down? Have a great Loan person if you need to someone to talk to...she does ALL my stuff and has a Lot of options
B
Thanks for replying - that was quick!
I'm currently taking out a $50k HELOC to help out my son and son in law with expenses for their business start up. They've promised to keep their usage to less than 50% of the line so that my fico doesn't take a hit from utilization.
If I can do this with 0 down, I've maximised my leverage, but as you say that may limit me to less attractive financing.
So the thinking would be to use HELOC money to finance the down payment and get better rates on the mortgage?
I haven't done it exactly the way you mention although my broker has thrown out that idea in the past. I suppose it depends on what you want to start out with. What I have done before, is to use my HELOC to buy a run down property outright. For example, I would by a run down house in a rental neighborhood for $25k that will appraise for $50k when it is fixed up. Then I put maybe $10000 into the property to fix it, and then I do a cashout refinance at 70% of appraised value. I get a decent rate since I appear to have 30% in the property although I actually have 0% which equates to 100% financing. Just make sure you use a conservative figure for the after repaired value. Appraisals are somewhat of an art and the appraiser can lean towards a price that it might actually be very difficult for you to get if you had to sell.
I don't think I could find anything I could afford solely with my HELOC. The cheapest condo I've seen on the MLS around here is $225k. I'd only be able to use the HELOC for the down (If I use a down at all).