What type of lending should I be looking for?

Question

I am a novice when it comes to different types of lending ( Conventional, Private, etc.) so I am looking for some help as to which route I should take.

Credit: Not so great. 650-700.

DTI: Great. If I had 750+ credit I could get a conventional loan on a 750k+ house.

Assets: Have a few properties but do not want to use them, 401k yada yada yada

I am looking to purchase MULTIPLE SFRs (40-60k) over the course of the next year and was hoping there was a lender or a type of loan that would allow for this with my prequals. I am not in the market to keep getting hard pull on my credit just to be denied due to Credit Score.

John D. · Answer

@Brock Y.  You should be able to significantly increase your credit score in a few months time.  It's definitely worth putting some time and attention in there.  I've found most people in your range can gain 50-75 points in 3-6 months.

Derrick Craig · Answer

@Brock Y. Conventional you are correct... BUT........

FHA Loans YOU may qualify

With FHA loans, you can get financing all the way down to 580 credit, as long as certain criteria are met. Here’s a quote I found from another mortgage broker, “I am a mortgage broker, you can absolutely get a mortgage with a 650 mid score. As a mater of fact you can go as low as 581 for an FHA mortgage.”

In order to get this type of mortgage, you will have to meet some requirements:

• The purchase price needs to be under the limit set for your city and state. You can find your limit amount here.
• You also need to have a debt-to-income ratio that meets the requirements

If I am not mistaken you can get up to 3-4 of these types of loans before they tell you no if everything else checks out. Different lenders have their own layered requirements as well on top of the FHA requirements. I hope this helps.

Joseph Konrad · Answer

I would have to give the always great option of private money, if you're willing to go out and make connections that will be willing to lend for the long term.

Another option which may or may not work for you is to find a portfolio lender who understands that these will be rental properties and will lend to you based on the deals rather than your credit history.

Hope this helps,

Joe

Brock Y. · Answer

@Derrick Craig Thanks. I cannot get a conventional loan with a 650 credit score that I know of. Unless I am incorrect on how DTI works (which I most certainly can be) I will not need to use the cash flow from the properties for my DTI hence why I do not think I need to wait 2-3 years. I make sufficient money with my day job to take on multiple loans. I always thought as long as your DTI is not high you will be fine. I would never count on cash flow to support an additional loan.

Derrick Craig · Answer

@Brock Y.

Get as many conventional loans as you can qualify for, then start looking toward your local banks and credit unions for portfolio loans/stacked collateral loans. This will allow you more leverage to continue buying more properties since you will be cashflowing more money this will take you at least 2-3 years to achieve it's not going to happen over night so be patience invest wisely and make sure you continue to put the money you pull out of your properties when you refinance them back into your business. It can happen trust me!! I started with a $10k CC and a $10k loan from my 401k Plan. Then refinanced, bought 3 more properties and refinanced all of them and the snow ball effect started for me consistently investing every penny back into the business buying more and more properties. I hope this helps sorry for the run on sentences!! LOL!

Happy Investing!!

Challenge yourself with something you know you could never do, and what you'll find is that you can overcome anything.

Brock Y. · Answer

@Matt Faircloth  Thank you. Looks like I will just have to wait and purchase properties every 6 months with cash. Cash has never been the issue I just wish I could be purchasing every 2-3 months with 30-50% down instead of acquiring slowly. I also really don't have the time to find a partner due to my job. Hence my interest in managed turnkeys.

Matt Faircloth · Answer

@Brock Y. - sounds like you are doing turnkeys out of state, managed by others... If that's the case I think your best bet is to bring in a partner with good credit and some cash.  You have some experience with the deals you have under your belt which is what you bring to the table, and maybe some cash of your own.  You can structure a partnership that will take care of both of you with a solid LLC Operating Agreement.

Take care,

Matt Faircloth

Brock Y. · Answer

@Matt Faircloth  @Nick Wing  Ideally looking for buy and hold on turnkey (or already rehabbed). These would not be local so I do not want to get into flips on these properties.

Experience - only a Investor/landlord with a few duplexes under my belt.

Nick Wing · Answer

Hey Brock,

If you are looking to fix and flip these properties, a private lender would possibly partner up with you. What kind of experience do you have? Are you going to hold these as rentals?

Matt Faircloth · Answer

Hey Brock,

What are you looking to do with the houses?  Fix and flip or buy and hold?  If you can find deals that need some work you can use a private lender or hard money short term.  If it's a flip you should be able to move the project along fast enough to sell and still make a nice profit.  If it's a rental, look to add some value to the property by repairing it and leasing it out. Then you would want to build a portfolio of a few rental houses (2 to 4) and go for a refinance of the entire portfolio.  That way a bank will not be looking so much at your credit, more at the equity and cash flow in the deal.  If you did smart rehab work and got good rents, you will be able to refinance out the short term money no problem.

Good luck!

Matt Faircloth

What type of lending should I be looking for?

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