No loans under $100k??

[Janelle A.]

Can anyone share some insight into how to get lending for a property under $100k? Most of the properties I'm looking at are in the $50 - $60k range and I've been told by two lenders that it would be a high-cost loan and therefore wouldn't close. My credit is great, so that's not the issue. Do I just find a hard money lender? Are there non-hard money lenders that do loans sub $100k? This is my first investment and I'd prefer not to do a cash purchase if I don't have to. But I'm confused about the lending side of things and hearing conflicting information. Any help is appreciated. Thanks!

[Perry Farella]

The issue in Illinois is the High Cost Statute was never done with lower cost properties in mind . So we hit the limit with our title charges, etc. very quickly on a 50k purchase price.
If this is to be a loan for you and not your LLC you can do the HomeStyle or Choice Renovation purchase & rehab loan with 15% down payment off the sum of purchase price and rehab dollars. To help get around the high cost statue write the contract such that Seller pays Buyer 2% of sale price for some of Buyer closing costs. That takes some of the funds out of the high cost statute calculation and switches them to Seller side costs. Of course you will have to make your offer more attractive to have a Seller do that. We have done that for our Investor clients successfully in Illinois.
These loans work by allowing you to be mortgaged to 85% of ARV. Must have a licensed contractor doing the rehab with all local building permits required and accept some lender oversight. But they are 30 year fixed rate loans with fixed monthly costs should you decide to buy , rehab, hold and lease it for a while. No pre payment penalty so you can flip it whenever its ready. My blog has stories of how these loan work for small investors and even how they compare against Hard Money loans. Rates are based on personal credit score and these days in the five's mostly for a 30 year term. Happy to answer questions any time.