Loan??

Asked by mcw, 11355 Wed Jun 29, 2011

I think I may ask the question before. I am currently searching for a condo for investment. I have a mortgage about 400k. I also have some credit card debt, which I am going to pay half them off. With the bank so strictly tight on loan, I am not sure if I can get a loan. I have only 150k for downpayment if I want to buy a 300k condo. Any advice is welcome? Thank you so much.

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, ,
Wed Jun 29, 2011
I agree with Ron, if $150k is your total amount of funds to take care of an investment property with, don't put all of your money into the property as a down payment initially. You can always make additional prepayments along the way.

So you have the down payment, but the other parts of qualifying is if your debt-to-income ratio qualifies, which is the ratio of your total monthly payments (existing mortgage, credit card debt) vs. your gross monthly income. For investment properties you'll want to keep that ratio to 45% or below for your best chances of approval. Your credit score doesn't need to be perfect, but as investment properties are higher risk you'll also want to make sure your credit is in as good of shape as possible, I am sure after you pay off half of your credit card debt you should see an increase in your scores (depending on how much debt, and your current utilization % on each card, it could be a big increase or small increase) but you may be OK qualifying without paying half/any of it down (OK debt ratio wise, and OK credit wise).

My recommendation is that the condos you should be looking at should be warrantable, meaning meeting Fannie Mae & Freddie Mac's financing guidelines, as it'll be a LOT easier to get mortgage financing than if they do not meet the guidelines. Examples of condo developments that would not meet guidelines are if they:

1. Have more than 15% of their dues at least one month delinquent
2. Are in a situation where the HOA/developer is part of litigation (minor matters can be acceptable)
3. Were a hotel/motel conversion
4. Have 20% or more of the total space is used for nonresidential purposes
5. Have one "entity" (person, company, developer, etc.) who owns more than 10% of the units in the project
6. Have timeshare or condo-tel/vacation ownership

I'd be happy to help if you still need it.
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Ron Thomas, Agent, Fresno, CA
Wed Jun 29, 2011
The Lender's requirements for an Investment property are quite different than for your residence:
Normally, they want at least 20% down; you have 50%.
Hypothetically; if you were dealing with a bank, I would deposit the $150 in that bank and tell them that you wanted to put $100,000 down; and keep the rest for taxes, repairs, safety net, etc.
Your down payment isn't tax deductible, but your expenses are (consult your tax person, please).
You may not want to pay off that credit card debt right now, consult first.
you should be okay.

good luck and may God bless
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