Wells Fargo said that they could not finance an investment property that has been purchased by the seller within the last 12 months.
Similar to the 90 Day FHA guideline, but 12 months for investment properties.
I'm going to try Bank of America next (to see if they have restriction like that). This first deal has been a huge headache, but I am going to be persistent on getting my first property so I can start feeling the ropes as a landlord.
It's really not a major deal, I just want to finance about 44k. Didn't think it was going to be like pulling teeth. haha.
The smaller banks don't want to fund because their net profit on origination is too low. I've had 3 local banks tell me outright that they weren't going to make enough on origination on a loan amount under 60k, and just nulled the loan application at that point.
I had one guy start the process, did the appraisal and everything, then the risk assessors told him that they wouldn't let him do it because they wouldn't make enough on origination (even though they wouldn't put it on the secondary market, and would hold the loan to term).
I wish I had enough cash to buy and hold at this point. But there is no way I'm going to touch my active 401k.
Another complexity for the local bank / credit unions is that I'm in California, and the property is in Ohio. Many of them will only lend to residents of the state (due to certain state laws or restrictions).
I may talk to some local credit unions.
If not, then I'll just have to wait the 6 months for the property, and hopefully save another 15k in capital for a second property. This is of course assuming that the seller will:
A) Not do seller financing (I'd have to think of LC vs Deed)
B) Is willing to collect the rents until July when I could then "qualify" to get the property.
My credit has taken a pretty nice hit from all the loan applications I've been popping up, so that kind of sucks.
Anyone know how long those inquiries are detrimental to your score? Is it 6 months, or 90 days? I should ask the finance company that.
Just in a somber mood right now haha. Maybe this is a sign for me to look elsewhere (local to me maybe? that'd force me to save that other 15k to come down with 25% down for a property in the Bay Area (which probably wouldn't have near the same cash flow .. yeah not doing that)).
I still have some hope.. I've opened up inquiry with Bank of America (just to find out what their restrictions are). I'm learning a bunch as I go, and have a LONG list of things to ask prior to even getting deep in with finance company.
I'm really trying to hammer away at these seller finance options, and when I open up the discussion with the seller about it, then I'll probably contact an attorney or one of the realtors I have as a contact in the area, to see if she'd be able to assist (they have internal legal teams).
I've contacted USBANK in hopes that they do not have these restrictions in place. I have one other contact at a local bank/broker (I haven't checked to see what they are, but they have a low loan limit which makes me believe they are not the servicer).
I just sent the email to the seller letting him know about the wells financing, and that I've already contacted another lender (this is the 4th one).
Mr_Investor I want to be that 1 arm'ed Mt Everest Climber :o). Also, is that a UFC beanie? It looks blue, so I'm guessing it's a few years old when "The Ultimate Fighter" first came out. I'm a long time Jiu-Jitsu / MMA guy (as are a few others that I've come in contact on this board and one which is local to me).
Whelp.. lets hope my long drawn out email to USBANK gets them to "tell me how it is" up front, and not bring me on a roller coaster of financial emotion lol.
actually, i think the small, local banks are the way to go...my local banker only charges me .5% origination fee.do you think the big banks like bank of america care about you?
Understood. But the ones I've contacted (about 6) have flat out said nope, we can't fund you because you're a Californian (I knew we were bad, but really? that bad?) or they did not service the loans, therefore they couldn't make money on origination or sell on the secondary market (high cost loans @ low value).
I really didn't think it'd be this hard to purchase an income property.
get a list of small local banks and call as many banks as possible...6 is not enough...i called more than that, and i'm not even a californian.. :) are you in california and trying to buy out of state? that may change things a bit if so
Yes, that's why most the local banks wouldn't loan to me. I was an out of state investor, and they'd only sell to local residents or people out of state looking to purchase a residence and not an income property. In parallel to my working with USBANK, i'll collect more of the local banks, and see what else they may be able to do (first targeting Credit Unions, since they service and hold the banks to term).
Since you seem to be ready to refi once that 12 months passes, hard money could be a possibility, as well as somebody with IRA funds to lend (contacting the SDIRA trustee companies might be worth a shot).
Hi Ben -- I just closed a loan with US Bank in Ohio (I'm from Kentucky). They have just 90 day seller title-seasoning, following Freddie Mac guidelines I believe. In fact, the seller and I had to wait a few days so that the sales contract would be accepted on the 91st day. (I purchased from a BP member, by the way.).
My loan officer has been great. She can lend anywhere in OH, IN, and KY. I will tell you that the USBank "national 1-800" staff has different guidelines than local US Bank lenders in the Ohio market. Give the loan officer a call (Janet Hatton). Just google her name and "US Bank". There may be min. loan amount of 50k (can't recall, many conventional lenders impose this) which may be an issue.
If this strikes out, try Citibank and Flagstar. They're the most liberal in many respects (such as # of financed properties), and I know that Citi doesn't have a min loan amount.
Right now I'm looking at a commercial loan to get around the residential loan restriction of 12 months of flips from Fannie / Freddie (according to the underwriters).
I have a contact / friend who is the VP of underwriting here in the Bay Area for a major bank, and will be verifying with him if that's an issue, or if it is indeed a Well's Fargo extra step. But USBANK also has that same restriction with residential loans for investment properties.
I have just received notice that my loan was declined from my conventional bank.
I'm considering approaching the seller about his options for seller financing. How should I approach this?
I know this is generic, but I'm going to poke around this part of the forums to get some idea's.
I'm just a bit flabbergasted and irritated right now with the news I just received from the bank. This first deal has been one hell of a ride.
Ben, unfortunately that's not the news now. One of our clients with 850 FICO has been turned down by a bank for a minor mortgage with 50% down! I advise that you arrange a lease option structure with the owner.
I have secured financing in the ways of commercial lending. It's a 5yr ARM w/ 20 Year Amortization, which obviously contours my numbers quite a bit.
I am just looking forward to getting the keys and title to the first investment property, and moving to the next. After I buy a second, I am going to concentrate on really feeling REI out, and finding out if it's right for me.
With that I'll probably roll the capital gained into an account for future purchases and rolling into an LLC. I'll be putting private funds into paying the properties off (hopefully the second will be 30 yr fixed).
Although I was told I was approved, I won't believe it until the seller has the cash, and I have the title LOL.
Just a comment, understand that banks have a "lending area" the area to be serviced under their charter as a bank and it is generally 30 miles from any bank location or affiliate lender. The loan policy usually defines the serving the community based on the collateral and/or the borrower, or both. US Bank might be a good one to ask.
For your first property and being a landlord, I'd really suggest you look for a property in your own area, not just for financing purposesbut also in terms of management. It is hard to know if you are being taken by a property management companyon a long distance deal if you have never performed management activities personally. IMO, not a good way to get your feet wet. Good luck.
Just a comment, understand that banks have a "lending area" the area to be serviced under their charter as a bank and it is generally 30 miles from any bank location or affiliate lender. The loan policy usually defines the serving the community based on the collateral and/or the borrower, or both. US Bank might be a good one to ask.
For your first property and being a landlord, I'd really suggest you look for a property in your own area, not just for financing purposesbut also in terms of management. It is hard to know if you are being taken by a property management companyon a long distance deal if you have never performed management activities personally. IMO, not a good way to get your feet wet. Good luck.
Hello Finance,
I have gone through a stringent property management interview process prior to choosing the one I ended up with. This included referrals from current investors etc. I have also gathered some local resources that are in property management and will ping them with things that I feel "aren't right".
As per my area. I live in a "Class A" neighbourhood in the Bay Area, and the cash-flow is not that great. There are Class C / B area's around me, but since Jerry Brown was elected, some of the biggest employers in my area are leaving. One that was founded in my city has already left, and the other one has opened talk to leaving since Meg Whitman lost. On top of that our unemployment is higher than where I'm investing in Ohio, and purchases of the bottom side are hard to get (FBI just ran through our sheriffs auctions and will hopefully put an end to the price fixing that's been going on).
If things start looking up better in California, then I'll consider it. But as companies leave Silicon Valley, and my immediate area, I'm going to invest where cash flow leaves a bit more room for error / vacancies. :).
On that note, one of my interview questions was to get proof that PM went into properties when asked for walk through. This is a picture of inside the property with newspaper.
Im a total new to investing but have a suggestion....
If the property is a single family home, couldnt you just claim that you want the property as a second home to visit and spend time with family there or something?
You would have to literally move into the house and occupy it, so simply move in there with an inflatable bed and spend a night or two or wait until whatever the legal requirements might be, then change your mind and decide you dont want to use it as a secondary home and rent it out.
Is this a possible solution if you REALLY wanted the house?
Origination? WTH is that? I just call my banker and say I found a house I want to buy, can I stop by and grab a POF letter? I would recomend to every investor to bank locally. WOW, maybe I am just sheltered here in Iowa!
Major banks care about origination. Local banks want people who live locally. I didn't fit into either.
To the other guy, I wouldn't like and say I would live in the property. I want separation and don't want some little lie to catch up to me. If I can't get the house without being honest on the application, then I don't want the house.
Either special financing or conventional, I want to do it legally without lying. This is how I am and who I am. I'm open, honest and trustworthy. Some say it's a flaw, but I think it's a virtue.
... purchases of the bottom side are hard to get (FBI just ran through our sheriffs auctions and will hopefully put an end to the price fixing that's been going on).
...
You do realize that the bid rigging at those foreclosures kept the prices artificially LOW - so expect that future prices might actually be higher at the foreclosure auctions ...