Home Buying in 44102>Question Details

Tamvic1, Home Buyer in 44102

why won't banks loan under 50k?

Asked by Tamvic1, 44102 Mon Apr 30, 2012

I am an investor and want to take advantage of the great deals on homes out there. My credit is great but I can't find any lenders willing to loan less than 50K. They will all loan more but not less.

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Try Third Federal. I originally bought my home through them with a $12,500 mortgage (however, my downpayment covered more than half of the house's asking price, so that might have been a factor).
0 votes Thank Flag Link Tue May 1, 2012
Simple answer: because they don't make any money on loans under 50K.
0 votes Thank Flag Link Tue May 1, 2012
The current government set caps on the percentage of closing costs to loan amount. There are fixed costs like appraisal and title work that do not change with the cost of the loan so at some point you reach a minimum loan amounnt with a lender. This was done to protect people looking for a loan from predatory fees but has really messed up the small buyer looking to get started in home ownership.
0 votes Thank Flag Link Tue May 1, 2012
Most banks do not lend below $50,000 because they consider it a higher risk loan. There are some banks that will lend at this level...you're best bet may be a credit union.
0 votes Thank Flag Link Mon Apr 30, 2012
Some banks will and credit unions as well. A broker cannot because of anti-predatory lending laws that put a cap on the "percentage" that can be charged which makes it not only unprofitable, but at times impossible to include all the necessary fees in the cap. A 40K mortgage with a 5% cap only leaves $2000 for all closing costs and that's just not possible in most cases.
Web Reference: http://HarpSupport.Com
0 votes Thank Flag Link Mon Apr 30, 2012
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