Prequalified for 250K mortgage, but...

[Maron Faulkner]

I got pre-qualified for an investment property (SFH) in Idaho for 250K, but now I can only get a HELOC on my primary residence for 48K, which isn't enough to fund the down payment.

The original HELOC was for 100K, which would have helped cover taxes and insurance and getting this whole thing started. First investment property. But, as the banker explained, because I am pre-qualfied, the bank is counting this like I already have a property that I am paying the mortgage on. And I haven't even identified a property! In fact, not headed to Idaho for another couple of weeks.

Eek. Rookie here. Any thoughts on a solution or do I need to wait and start over?

Many thanks.

Maron Faulkner 

[Jace Holt]

@Maron Faulkner For starters, I normally look for commercial or multifamily loans. You said you are looking for SFR, but I'll give you my process. I'm sure you'll be doing commercial loans as well before too long!

When calling the banks, I start by asking who I can speak with about my type of projects. In a normal bank, it's the loan officer. Commercial loan officers are usually pretty casual and most don't answer the phone the first time. They usually come in later in the day, take lunch for about 2 hours, and leave by 3 or 4 so I normally try to call around 10-11AM or 2-3PM their time. Preferably the 10AM to 11AM slot. That gives me the best odds of reaching them. I make a note of their response time because nothing is worse than having a property under contract and having a lender who isn't answering their phone or isn't on top of things. Once I get an answer or call back, I ask them and then record their personal office number or cell, whichever they prefer, so I don't have to go through the phone maze next time I want to talk to them. 

Once I'm in touch with the right person, I tell them what I'm working on or looking for and ask them if their bank has an appetite for it. A big tip is to ask them what products they are heavy on (this means too many in their portfolio which means they want to diversify and loan on other things) such as multi family, new construction, storage units, etc. This can give you an idea of how willing to get your project done they are. I ask if they are pushing more for reserves or for loans right now. This lets you know how to negotiate with them when the loan goes to the board. At this point, most will then tell you they want you to have a banking relationship where you set up a personal bank account or run your rents through them. This is all negotiable, but it certainly helps the loan approval board.

General questions I ask are:

What size is your bank

What LTV do you require?

What DSCR do you require?

How long does it take to get a loan done and how does your process work? 

Is there a threshold such as 1 million dollars or 5 million where the loan gets elevated to another board?

Do you underwrite the loan yourself?

If you are searching for a particular vendor such as a contractor, this is a great chance to ask a local immersed in the market who likely deals with contractors. Without asking, I have even gotten referrals of people who want to invest in my type of projects. 

Yes, I live in the IF area. I'm working on a few projects here and some out of state.