Financing Options With Credit Score Of Around 750
This one is to all the gurus out there:
How do you usually finance deals that you will only keep for 3 months and just want to flip. Assume that you have the 20% down. What kind of mortgage options are available for such short-term hold? Obviously I want to keep closing costs as low as possible (who doesn't). Was just wondering: ARMs, Interest-only loans? I am new to this so this is a big question for me. Appreciate all the help. Thanks!
Putting 20% down will give you a very wide range of options.
Since these wil be short term holds stay with very short ARM loans.
Interest only loans will lower your payment but your only looking at two or three payments so why limit yourself?
Why not look at loans that have the lowest APR. This is the real rate you will be paying.
If your looking to limit cash out of pocket then put 10% down. You can still get good rates and still have enough cash to make a few payments.
Now as for closing cost. If you get a lot of that put into the loan then you could have a prepayment penalty.
If you start to work with the same companies then you can negotiate lower closing cost. Volume customers always get a discount even in RE.
Be absolutely sure the loan you get has no pre-payment penalty.
I can't stress this enough.
Most have a pre-payment penalty of 2%, if you pay off the note before 2 years.
[addsig]
Personally I wouldn't use my own credit at all. If you have 10 or 20% to use as a down on a piece of property, learn how to obtain title and possession of the property through "sub2", especially of you are wanting to flip it immediately.
Every ARM that I have seen so far has a 2% prepayment penalty attached if paid within 2 years of obtaining the loan.
Have you thought about a money partner, how about a double closing to the new investor or sell the contract to the investor for a sum of money.....
Just thoughts,
Debi
Hi all,
great responses! the thinking goes like this...to hold on to property for a couple of months while we:
1. fix it up to its maximum ARV
2. find an investor/buyer to purchase the newly repaired home
certainly the 2% prepayment penalty sounds steep for what we are trying to do and we hope to finance it out ourselves but would this be a good situation for a HML? Do they have the same penalty fees? Also to answer the sub2 post, we are brand spanking new at this and from everything we hear newbies should not be getting involved in sub2 deals from the beginning. (need to read up on NJ laws regarding this). Thanks.
All,
Is there another financing option for what we are trying to do other than a convent. loan? How about a HML who won't penalize us for paying back the loan in 3 months but then again what would his benefit be? I am completely lost as to a solution to this. Thanks.
I work for a lender, you will have an option to buy out the pre-payment penalty, most will allow you to take a higher rate to do so. Not a big deal in your case to have an increased rate/payment if it is a short-term hold.
Not being aware of what your situation is this may be of no help at all, but then again, maybe it will fit.
If you have equity in another property you could take out a line of credit. Very low cost to start, I paid $275. Once and done, no need to get a new loan every time you do a deal.
mykle,
thanks for the reply. i have thought about the equity line of credit and I do have about 150K in equity in my house and wanted to know how the lender sets this up. Mine is CountryWide. The fee you mentioned was the only closing cost? Sounds like the way to go for me. How much of a line of credit would I be able to get for my equity typically?
As mentioned you can avoid the prepayment with a slightly higher rate.
Hard Money will have a lot more points so you will see a savings.
It's difficult to give specific answers, there are many variables.
There wasn't a mortgage on mine to start with and I just took 70% of the assesed value so didn't need an appraisal, all I paid for was title work and I think $30 to the bank to set it up. I'm not sure what all your situation would call for. It would also get more expensive the more leverage you're trying for, obviously less risk for the lendor at 70% of value than at 80% and so on. I'm pretty sure you will find it cheaper than initiating a loan on a new property regardless of any variables. Worth looking into anyway.
How much you could draw on 150k equity...the value of the property would come into play, 150k equity on a 150k property would be 105k at 70%, 120k at 80% .... 150k equity on a 300k property would leave you 60k at 70%, 90k at 80%...