Financing drying up?

Question

Is anyone else running into trouble getting conventional financing?  Just went to close on a deal that was put on hold for about a month due to the virus and I am being told no one is lending.  This is in Little Rock, Arkansas.

Account Closed · Answer

Some lenders are predators, looking to up their fees, points or what ever, asking for documents, leading you on and turning you down! I've had long experience and understand their transparent tactics. I've gotten along OK, with a minimum of conventional financing.

Your best financing is the Bank of the Seller!, no application, no appraisal cost or JUNK FEE, The seller won't give you money but will let you pay them back on their equity while putting you in a great deal without lots of real money.

Getting the Seller to say YES, "I'll hold a mortgage"

'You can ask, "Mr. Seller. I'd like to buy your house, but I need some seller financing! Well that's a beginning. But if he says NO, I want cash! The negotiating for seller financing is done.

Test sellers reaction first while in the rapport stage of your negotiating, try to get a verbal commitment before asking for financing.

After a period of negotiating and coming to a tentative  agreement of sales price of the building; make the contract (in writing) contingent on the owner holding a mortgage (state the terms, $100,000.00 amortized for 20 years at 6%,  P and I of $860.00 a month with a balloon in 60 months in the amount of $XXXX.  (add up 60 payments to show seller how much he will receive and the interest he will get)

Showing the seller the benefits of the mortgage  will help you get that financing.

PRINCIPAL mortgage (THE BEST), sometimes you can offer more than the seller wants if they agree to give you a principal mortgage. This is a mortgage with no interest, all payments go to liquidate the loan. Clause: Inconsideration of x dollars, seller agrees to accept a principal mortgage  of $100,000 with payments of $1,000 a month until paid in full.

Always make sure your principal mortgage has an assumption clause in it (mortgagee agrees that this mortgage is fully assumable without qualification with release of mortgagor.

I've written some reports on creative financing - it's really a great way to CONTROL real estate using leverage and little or no cash.

Good luck with Seller Financing.

Pete Harper · Answer

@Kris Mead

I had a similar experience looking for financing. Most of the major banks and private money lenders are sitting on the sidelines until Covid-19 blows over.

I had success with small to medium sized local banks. I made a list of 20 local banks and credit unions and just started calling. I was able to identify two medium sized banks willing to make commercial loans.

Now that I have my financing lined up the seller has gone AWOL on me. He is hunkered down at home not answer phone calls.

Persistence pays off.

Hadar Orkibi · Answer

@Kris Mead talk to Ridge Lending group. they will sort you out. google them

Ryan Coffman · Answer

Most banks here are bogged down with PPP loans and won't look at anything right now. Tough times!

Kenneth Garrett · Answer

@Kris Mead

Things have definitely tightened up.  Just closed on a flip yesterday.  There are still lenders lending, but it may take a few calls to find one.  Use small local lenders in your area.  You will have the best luck with them.

Joe Cassandra · Answer

Post the deal in marketplace. Someone here may fund.

Shane Gordon · Answer

@Joshua Schmidt Thanks so much. Keep me posted and safe travels!

Joshua Schmidt · Answer

Shane, we did traditional financing, 20% down and had the money on hand to do the rehab.  Did most of the work ourselves as this was our first one.  We are going to get all of our money back after the BRRRR and should be able to move on to the next one.  However, we haven't refinanced yet as I am still in Afghanistan about to make the 2 week trip (because of Covid its that long) back home.  Ready to get this wrapped up and move on to the next one!  I'll let you know in this thread as soon as we refinance and who we done it through.  We financed the original deal through Bank of Little Rock Mortgage and Monica is a Rockstar!

Shane Gordon · Answer

@Joshua Schmidt I am a newbie getting started in BRRRR in Arkansas as well. How did you pay for the house upfront before you rehabbed it? We are looking to use a HELOC to purchase, then do the cash out refi later on. Please let me know of the bank you are using if they are lending right now. Thanks!

Kris Mead · Answer

@NaDean Bowles We went to terminate the deal, because we felt bad for the seller having to wait an undetermined amount of time.  He came back saying he’d rather wait than terminate.  So now we are pushing it out another month or so.  I have some leads for financing, but I’m just going to wait and hope things settle down.

Financing drying up?

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