How to get 80% LTV Loan Instead of 20% Down on Purchase Price?

Question

Hello,

I'm trying to figure out how I can buy a property with none of my own money down, since I am picking it up for well under market value.

Here's the details for more accurate advice:

Duplex in Indianapolis, IN.

3/1 each side. Currently rented at $700/per side, tenants pay utilities.

Fully renovated in last couple months.

Perfect comp a few doors down just appraised at 120k.

I'm picking mine up at 88k.

Conventional lenders are forcing me to put down 20-25% of purchase price even though this will appraise much higher than my purchase price. My purchase price of 88k is 73% or theoretical appraised value.

So how do I find a lender that will loan me 100% of the purchase price and use the built in equity (difference in value to purchase price) as my down payment, so I don't have to fork over a big chunk of cash for a downpayment?

Or is there a refinancing hack I am missing?

Thank you all!

Billy Bell

Mark F. · Answer

@Billy Bell, you can 100% use delayed financing to get back 100% of your money, I've done it myself and there is no seasoning period and the process can start the day after closing BUT... you have pay for the property with cash up front first. Then you can start the delayed financing and they will use the current appraised value of the property and you can pull out 75% or $93,750 based on your $120k estimate which will cover your $88k purchase price AND closing costs. Feel free to reach out to a mortgage guy for more information, I've dealt with @Zack Karp and have always had awesome service.

Mark

Billy Bell · Answer

@Zack Karp & @Mark Faustrum Thank you guys! I do not have and Uncle Bob with the funds ready to go, but I am definitely going to have to find one amongst my friends and extended family, because that would be the best case scenario for sure!

Thank you guys so much for your input!

Zack Karp · Answer

@Mark Faustrum thanks for the tag buddy, hope all is well.

@Billy Bell do you have the funds to pay cash?  Or get a loan from Uncle Bob without recording a lien on the property?  If so, then delayed financing is your friend.  You can start the refi process literally the next day after you close.  So in 30 days or less, you can get all of your money back.  Assuming your ARV number is correct.  No need to wait 6 months.  No need to pay hard money costs.  If you want more detailed info, feel free to reach out.

Best of luck!

Sheena R Roth · Answer

@Billy Bell

I think listening this BP podcast episode would be worth your time:

BiggerPockets, #301 with Alex Felice

If you’re on a time-crunch start the 19 minute mark on the podcast.

Here are my notes from the episode:

Problem: Lender's typically require 6 month "seasoning"

To avoid the seasoning period, use the Delayed finance exception:

Fannie Mae - finance for 100% of HUD-1 (purchase price - taxes) BUT the little known fact is that you can add contractor costs, repairs, etc. OR 75% of LTV/ARV, whichever one is less. Applies to SFHs, different restrictions for multi units.

Get the HUD-1, go to the title attorney and ask if you can add stuff to the HUD-1. Give them invoices for the contractor, etc.

Salvatore Lentini · Answer

@Billy Bell - If it was recently renovated and a house a few down went for 120K...why is the seller willing to sell at 88K?  Is the seller the one who rehabbed it?  It's very difficult to get banks to loan on LTV on a purchase.  At purchase banks usually base their loan off of LTC (Loan to Cost).  On refinances they will go with LTV with seasoning (anywhere from 0-6 months depending on lender). Like @Matt Hurley said - if you can buy it with hard money or private money.... then you can refi and get 75-80LTV.

Matt Hurley · Answer

To my knowledge the only way that’s possible is via private financing (as mentioned by @Tom Shallcross), or by a hard money loan  then refinance at 80%. Seems like a hard money approach would be ideal, since most have <6mo. flip loan products already available. If you’re walking into the deal with that much equity, it’s definitely worth it.

To also speak to Tom’s concerns, make sure there’s nothing sneaky that could hit you down the road. Off market is great, but build inspection/finance contingencies into your offer just in case there’s a hidden lien or unforeseen repairs that would show up. Not required, but a deal like what you’re mentioning makes me a bit wary.

Mark F. · Answer

Thats what we are all here for, to help each other. good luck!

Billy Bell · Answer

@John Coon Now that would be ideal to just get one loan, instead of paying high hard money interest on the 1st loan, then paying the re-fi costs and praying it appraises where i need it to for the re-fi 6 months down the road.

Thank you for the guidance. I'm going to call around to some local banks!

Thank you,

Billy Bell

John C. · Answer

Billy,

I would try a local bank or CU.  See if they will require the 20-25% IF the appraisal comes back as you suspect.

I have had success using a local bank using there ARV appraisal for no money down (all numbers, closing cost, repair cost and down payment were all within the banks requirement of 20%).

Billy Bell · Answer

@Sheena R Roth YES!! You are incredible! I remember listening to this one when it came out a while back, and was going to go back to listen to it, but now I have the cliff notes thanks to you!

You're awesome. Thank you, thank you, thank you!!

How to get 80% LTV Loan Instead of 20% Down on Purchase Price?

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