Investment Property loan

[NA Ken]

I was denied a loan to purchase an investment property using quicken loans.  They said the property value must be greater than the loan amount, have a low income to debt ratio, and have enough reserves.

The property is worth 140,000, I have the 25% down payment, which is 35,000.  They calculated that the house must be worth 200,000 and have 25% as a down payment.  I don't understand what this means.  I've always thought that the lower the loan amount, the easier it is to qualify for a loan.

I think what they are doing is calculating the amount from a different point of view.  They are calculating it based on a property that I already own and want to finance it to pull equity out - the last part of the buy, rehab, refinance strategy. 

If I was using the brr strategy, it would make sense to only lend on a property that has a higher value than what I am financing it for.  

For example, if I paid 140,000 cash, rehabbed it, now it's worth 200,000.  Now I would qualify for the 140,000 financing with 35,000 down.  75% of 200,000 is 140,000.  So they are only going to finance 70% of the value of the property.

Is my assumption correct?  Or is the lender just tightening their lending standards?   Or is it both?  Or is it something else?

[Corby Goade]

It sounds like there is a misunderstanding, but there's a bigger problem here. Quicken and virtually all other online lenders are a complete waste of your time and energy. They might have slightly lower rates, but trust me, the "service" you get from them will be abysmal. They'll kill deals for you- just like what you are experiencing right now. It's especially bad for investments. You're likely getting advice right now via quicken from someone who has never bought a house and has had virtually no training in their job. 

Find a local lender- regional bank, credit union, mortgage broker who knows what they are doing and will be accountable to you- in a good way, they WANT to give you good service. Those lenders are everywhere. At quicken, that person who you are talking to gets paid in volume, not service. They just want to get to the next phone call.