100% Financing Question on 1-4 Fam - Posted by Lisa

Posted by Ed Garcia on March 15, 2001 at 11:34:54:


I took Steve’s post down because soliciting or advertising is not permitted per editorial policy of this site.

I have already called him in Ohio, but he didn’t seem to be in. Lisa any worth wile source of business I follow up on. The problem is, that you’ll get brokers hit on this site and you don’t really know if they can perform or not. Now lets talk about your deal.

First of all when you mention that (I’ve got 5 deals under my belt so far doing mostly 80-90% down with seller carry-back on balance.) I think you mean that you’ve got 5 deals down at 80 to 90% with financing, and the seller is carry-back the balance. I don’t think you mean to say that you put down as down payment the 80 or 90%… That tells me you’re using a local portfolio lender. A recognized National lender would require you to have at least 5% of your own money into the deal.

I think we both know that your credit score is great, but you seem to be concerned about your debt to income ratio. Lisa, I think that there is a possibility that the lender that you’re using doesn’t want to do any more deals with you and us using the debt to income ratio as an excuse. The reason I feel that way is because usually after they lend on 4 or 5 deals they want to maintain what we call a reasonable contingent liability, meaning, we only want to lend so much per customer depending on their financial strength.

Therefore you may be at the lending limit that the lender would want to go with you based on your financial strength. When figuring debt to income ratios on 1 to 4 units, the rule of thumb for lenders, is to ad in the income of each property and apply 75% of the monthly income, towards your income leaving 25% to cover expenses and vacancy. That is the same formula used to determine if the property is operating with a positive or negative cash flow. The reason I say that is because many investor just deduct the mortgage from the rents received and figure the difference as their positive cash flow, which is incorrect.

Lisa, unless you structure your deals with private financing, or hard money, I think you 100% financing days are numbered when dealing with NOO properties.
I know that you’re buying with leverage, but we haven’t talked about how good your buys are, that could be a deciding factor as well.

You sound like you could be a good candidate for a working credit line, which could solve your problems.

Ed Garcia


100% Financing Question on 1-4 Fam - Posted by Lisa

Posted by Lisa on March 15, 2001 at 07:13:19:

This is my first time at this forum so please forgive me if this question is asked by everyone.

Here’s my situation:

I’ve got 5 deals under my belt so far doing mostly 80-90% down with seller carry-back on balance. My credit score is in the low 700s. I have no debt but my mortgage, but it is about 55% of my 2000 W-2 and about 45% of my current VOE. I do have a lease from a non-family member that is paying 1/2 of the mortgage payment which can be verified by cancelled checks, depending on how a lender calculates that lease my DTI is 25-38% if they agree to include the lease (some have not).

I’ve had good success at buying 2-4 family units, converting them into condos and selling them as such. (This is much easier work than dealing with contractors.)

Is it possible to structure a deal to accomplish this at 100% financing. I can usually get the buyers closings coordinated so there are no issues about partial loan releases.

Thanks for your help.

PS I do some SF also and would like to know details on 100% on them also.