Financing in 19406>Question Details

Brian, Home Buyer in 19406

Financing Rental Property: Creditworthiness, Co-Signer, and Down Payment Questions

Asked by Brian, 19406 Wed Jan 27, 2010

I am a young professional and have been saving money to purchase a multi-family rental property near my current residence. I have strong monthly income (5300/month gross) and a very low DTI. I am still living with my parents and have very few expenses except a car payment. The investment properties I am reviewing are being sold between 125 - 200 K. I have a two questions and would appreciate your input:

1. With good credit (around 760), is it possible to put a down payment of 10 - 15% on one of these properties instead of 20%? If not, what about with a co-signer? I would prefer to not take out an FHA (for the 3% down payment) due to the requirement to live at the property.

2. Given the details above concerning my employment, credit, and if I had a 20% down payment, are lenders likely to lend me 125 - 200K for this investment? If not, what if I had another person (only 1000/mo income, very low DTI, no living expenses) co-sign?

Thank you,
Brian

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Thanks Ben. I'll look at the website.
0 votes Thank Flag Link Fri Jan 29, 2010
I would look into a Home Path loan http://(www.homepath.com). These are for Fannie Mae REO properties and will allow investors to purchase with only 10% down. They also have a HomePath Renovation loan, but it is for owner-occupant only. But like my friend Bill mentioned, the lack of prior rental history might hurt you for chances of getting approved for the loan (but it never hurts to try). Not all lenders will do these type of loans but you can find a list of lenders in your area by visiting the website and also see the inventory of homes that they have.

That is pretty much your only option for a low downpayment on investment property as majority will require 25% down.
0 votes Thank Flag Link Fri Jan 29, 2010
Brian - I admire that you want to start a business in property, but you are losing out on $8k plus in federal tax credits by not buying your first home. You could use that money to buy or repair other properties. The minimum down payment in most IS 25% as others mentioned. You also have to make sure that you have 3 credit lines that are over 2 years old each. Score is not everything. Your lack of rent history at home with your folks may cause you an issue (no history of rental history). Lenders don't like lending to people who live with their parents and won't be living in the house. Also, if you decide to live in it as Terrence mentioned, you'll be put at the top of the bidding list. On foreclosures especially, the pecking order is neighbors first, non-profit organizations second, first time home buyers third and investors last. You have more negotiating power. Heck, from there, you can borrow money from HUD to fix up the house (3% rate to 50K) for section 8 housing and have a guaranteed rental income. I'd recommend you visit your local REIA office (Real estate investor association).
0 votes Thank Flag Link Fri Jan 29, 2010
Brian, I'm a mortgage banker. FHA is only for primary residences so you can't go FHA. You can't get PMI (which is required on 81% LTV or higher) on investments so you need 20% down. If you have the 20% down and your credit score is 760 your only possible holdup could be your affordability ratio (monthly debt payments/divided by gross monthly income). A co signer would only help if your affordability ratio is too high. If the co signer had a good credit you could use the cosigners income to help your affordablity ratio but we'd also have to take into consideration the co signers debts. Your specific questions about the cosigner and your income can only be answered by compairing both of your debts to your income and getting a percentage. The only way to know for sure where you stand is to have a loan officer take a quick application. I'd be happy to assist you. My number is 610 622 2212 and cbahnsen@mortgagenetwork.com. Have a good night. Chad
0 votes Thank Flag Link Thu Jan 28, 2010
I recently assisted a doctor purchasing a 5-unit and, even with his income and credit rating, he still had to put down 25%. Based on the criteria you have established, I would assume that the properties are single units. If that is the case, uncertain as to how the property will cash flow if you were to go FHA. Good Hunting!
0 votes Thank Flag Link Thu Jan 28, 2010
Brian,

I would highly recommend that you give Chris Holloway at Wells Fargo 215-572-4839 or Elizabeth Burlinson at Bank of America 215-749-0893. Both of them will be able to answer all of your questions regarding financing.

Are you currently working with a Realtor? I would highly recommend working with a Buyer's Agent. A Buyer's agent will look out for your best interest and is working for you!
If you would like any further information please feel free to contact me I would be happy help you!

Best regards,

Kimberly Collins, Realtor, ABR

"A Refreshing Real Estate Experience"

Keller Williams Realty Group
Cell: 610-476-7519
Office: 610-792-5900 Ext 8177
Fax: 610-792-8131

Oh, by the way I'm never too busy for your referrals!


Search the MLS -- for FREE! Visit http://www.Kimberlycollinsrealtor.com
0 votes Thank Flag Link Wed Jan 27, 2010
Just because you have a low down payment for FHA does not mean you have to keep it there. You can purchase up to a four plex with FHA as long as you live in one of the units. When it's time to pay your first bill, you can pay the other seven percent. No problem.

I would highly discourage you getting a co-signor. You have a car payment and that gives you a credit history. If you have a credit card or two, this also helps. IF you have the income and credit score you say you do, then there should be no problem with you getting a loan.

I would suggest getting with a LOCAL lender or bank (not TD Bank, Bank of America, etc) or even a local credit union. Find out what you can be preapproved for. After you know what you can get and find out what programs they have, get with a local real estate agent and start looking for places which can be good to start earning a profit. Also, be sure that you find an agent who knows about investment properties and how to find them. You will need to know about the Annual Property Operating Data (APOD). This gives you the information on what the incomes are or could be and has all the expenses to operate the property including taxes, trash removal, etc.

Study up. If you need any assistance, please contact me.

Terrence Charest, e-Pro®
REALTOR®
Century 21 Associates
905 Easton Road
Willow Grove, PA 19090
Cell (Preferred): 877.614.1494
Office: 215.659.5250
Fax: 215.659.5550

http://www.HomesForFreedom.com
tcharest@HomesForFreedom.com
“Giving to Those Who Gave”
0 votes Thank Flag Link Wed Jan 27, 2010
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