Need advice on bank financing - Posted by Freddy (OK)

Posted by Kyra Walker on February 20, 2006 at 02:04:27:

I need to close on two houses I own I have a buyer for both homes and I have the Appraisal & Titles to both Properties. Please e-mail me.

Need advice on bank financing - Posted by Freddy (OK)

Posted by Freddy (OK) on January 26, 2005 at 20:26:54:

I have an investment home under contract. I have done SEVERAL Lonnie deals by paying cash and selling on terms. I am basically wanting to do the same thing with this stick built VA home. I need to get a loan and I am not sure what is out there for investors, so I am asking here. I have very good credit, (FICO ranges between 741 to 779 with the three credit bureaus). I went to my local bank today and they told me no problem. They said it would be a 15 year fixed rate loan at 8.25% and they would loan 75% of appraisal. She admitted to me that their rates were high (at least she was honest). I feel I can do better than this. The funny thing is this deal will still cashflow nicely even at the terms quoted above!!

I am looking for a good interest rate and terms to maximize my cashflow on this deal. Can anyone give me a little unbiased advice as to the best type of investor loans that are out there. I am new to going to the bank to finance a deal, so I am entering unchartered waters now.

I am going to turn around and flip this home on a lease option to a tenant buyer and I hope to cash out within five years, but it won’t hurt my feelings if that doesn’t happen either :slight_smile: I guess you could say I am basically trying to do almost the same thing as I have done on my mobiles in the past, just on a little different and higher level.

Any help will be greatly appreciated.

Advice - Posted by Allan Beraquit

Posted by Allan Beraquit on January 27, 2005 at 20:02:48:

I agree in part with Jimmy, but disagree in principal?.

I take it a broker or two has gotten under your skin. Many have gotten under my skin as well. In today?s world, most (80%++) mortgage Loan Officers (Bankers or brokers) do not have what it takes to represent themselves at this level of the Residential Real Estate Game. Bottom line is: Your Lending Source is ONLY AS GOOD AS THE INDIVIDUAL YOU ARE DEALING WITH.

Find yourself a good Loan Officer and kiss his feet with loyalty, and he?ll deliver the world.

#1 Banker or Broker?
Most borrowers are doing themselves a disservice by doing business with a bank, as your bank LO only knows one product?their own! When you find yourself in a pinch, and your deal does not fit within a certain profile, you find yourself having to reestablish a relationship and understanding with another source that may ?As they?ve sold you? extend more flexibility. This time, you?ll have to fight with and screen 8 incompetent or unknowledgeable bankers and/or brokers to hopefully find that one gem.

Again, assuming you are dealing with two equals, WHY limit yourself to a banker?s products when a broker or banker with the ability to broker can offer you 1000 times the amount of service, product and in fact, offer you the bankers own products for less than what the banker can offer you on a retail level?

Proof:
>>

Today, I can write a 100k NOO Loan @ 5.750% with 0 points, no balloon, no ppp, no charge for appraisal & title policy and the closing cost will be within $100 more or less than your retail Hibernia Branch. If Hibernia needs to 3-4 hours to generate a decision, they are in fact re-underwriting you. A good LO will keep an ongoing file on their repeat clients and as new transactions are emailed or called in, it should take no more than 10 minutes to update the file and another 5 minutes to generate a firm loan commitment. And when it?s all said and done, you?ll be making your mtg. payments to Hibernia National Bank who services their own loans for a period of time and bulks & ships to FNMA.

End Result: Same closing costs + lower rate + no balloon + lower down payment + Same Company (Hibernia) = bank product offered for less by a banker/broker.
My point is ? It?s not the entity (Banker, Broker or Multi-Capacity Banker/Broker); it?s who your LO is and the products they have access to. Jim, you speak highly of your banker. Imagine how much more service he can provide you if his hands were not tied. For you, it may be a prudent relationship. For most borrowers with multifaceted needs, it is most always not.

We do however agree on something. ?A good loan officer (Banker or Broker) will allow their R.E. Investor clients to focus 100% of their time on what makes them money??seeking the next investment opportunity?

cross-collateralization? Yes, we can do that too for the right borrower.

#2 Cash Flow or Buy & Sell?
It all depends on the individual?s needs, desire, capability and investment goals. Most will prefer to accumulate wealth during their early investment years and eventually liquidate or restructure holdings to focus on cash flow.

In the early years, it?s all about your investment capital working in a vehicle that will generate the highest returns. In many if not most markets, it is most often through appreciation vs. cash flow. To use an analogy; buy your growth oriented stocks when you?re young and when your old, convert them to blue chips when generating dividends sets precedence over appreciation.

Not to say, you can?t find a home in an market appreciating at a rate of 15 ? 25% that will cash flow to boot.

My point was ROI
Lets compare apples to apples - If one had $100,000 to invest, what should they do?

Investor A: Assuming Bank FNMA Financing with 20% down, 30/30 @ 7%, and $3,500 in avg. closing cost & prepaids per transaction, they would end up with 4.26 rental properties. Assuming gross rents @ $1,000 per unit, your gross rents equal $4,260.00. Debt Service is $532.24 per unit or $2,267.34 total. Your NOI is $1,992.66 or $23,911.92 per year. Assuming zero mgmt, ffe & maintenance expenses, your return on investment (ROI) = 28.07%

Investor B: Assuming 100% Non Conventional Financing with zero down, 30/30 @ 8% and $3,500 in avg. closing cost & prepaids per transaction, they would end up with 28.5 of the same units Investor A (Above) purchased. Gross rents @ $1,000 a unit equates to $28,500 Per mo. Total Debt service is $20,912.16 per month. NOI based on the same assumptions is $7,587.84 per month or $91,054.08 per year. Assuming zero mgmt, ffe & maintenance expenses, your return on investment (ROI) = 91.05%
A calculator will always tell the tale. Now the big question is?.Does your local bank offer this type of financing which will allow investors to maximize a very basic, yet most important fundamental of investing?..what is your return on investment?

Try that with your bank loan officer! J

Allan
Banker/Broker
allan@flmortgagebanker.com

Re: Need advice on bank financing - Posted by Jimmy

Posted by Jimmy on January 27, 2005 at 09:53:28:

I disagree with Allan. I love local banks, and prefer them to anything the mortgage brokers can deliver to me.

Here’s why:

  1. You are in Oklahoma. My understanding is that resale values and rents in many parts of Oklahoma are similar to East Texas, where I do biz. If this is true, your rental properties will deliver positive cash flow right away. and if you are buying right, they deliver a LOT of cash flow right away. The point: You can handle a 15 year amortization.

  2. Check different business banks in your area. If there is a Hibernia National Bank in your area, go see them. They write my NOO-investor loans at 5.95%, 15 year am, 8 year balloon, no points, no PPP, no appraisal (if I am willing to go off of assessed value), no title policy. The closing costs are absolutely MINISCULE. They do not re-underwrite me every time I need a loan. I just email the detail to my banker, and I get a decision within a few hours. Hibernia is based in New Orleans, and they have spread over the south. no sure if they are in OK. Your credit scores are high enough to get in the door.

  3. I used to spend a ton of time chasing down the best rates and terms, dealing with mortgage brokers and their BS. Now I spend my time chasing down deals. The financing is the easiest part of the transaction.

  4. One more benefit. My banker likes me and likes my business. He really likes it when I go out a buy properties first (with cash, or a combo of cash and seller-financed notes), and then bring him the deal to refi. An average property for me costs 40-50K. My banker does not want to deal with this small-time crap. He want me to do 4-5 of these, and bring them to him as a package. He does a cross-collaterazlized loan on The package. Try that with your mortgage broker!

Re: Need advice on bank financing - Posted by Allan

Posted by Allan on January 26, 2005 at 21:08:30:

My first advice…stay away from the banks.

In order to maintain maximum cash flow, a 30-yr fixed may just be what you need. As of today, we?re doing NOO properties at 6.125% on a 30/30 fixed and 5.875% on a 15/15 fixed. It?s a FNMA product, so 90% is what I?ll lend. You can further improve these rates by buying them down with points. Loan amount needs to be at least 50k. If between 40-50k, I?ll have to tack on a .125% (Big deal) to the note rate. If you?re looking for a 15 yr fixed, I would do my best to talk you out of it, especially considering the minimal difference in rate. Stick with a 30. 30 year notes and their lower payments will improve your borrowing capability on your future transactions. No to mention, principal reductions are minimal as opposed to building equity via appreciation. If your holding period is less than 5 or even 10yrs (Like most investors), then your wasting cash flow with an am period any less than 30 years.

If you really want something interesting, how about substituting cash flow for maximum return on investment (ROI). We have a 100% NOO Purchase product (Zero Down) with a 30-year rate of 8.125%, which can be bought down to 7.125% for those looking to fully amortize their loans. By putting next to nothing down (Prepaids), your ROI will be 1,000X greater on your investment vs. putting 25% or even 10% down on an investment property. Now you?re banking on making money via appreciation (Buy, hold short and sell) vs. making a couple of dollars a month via net rental income. Imagine how many more properties you can buy simultaneously with your 10% or 25% down payment?

Info worth reading can be found on the following link:

http://www.flmortgagebanker.com/financing_investmentproperty_100%financing.html

I hope this info helps.

Please feel free to call or email with any questions.

Allan
GNMLII

Re: Advice - Posted by derronef

Posted by derronef on January 28, 2005 at 05:59:51:

hey allen i have a question for you ? i dont have any collateral with bad credit can u help me out ? i have some great investment property in my area ?

Re: Need advice on bank financing - Posted by Lisa

Posted by Lisa on October 26, 2005 at 03:44:40:

I like what you had to say, I am looking for a banker in the ok are. I thought I had it already set u, but them the bank made somechanges within there bank, I was just wanting to do a 10 12 year inhouse loan, due to the changes withinthe bank. They know longer do inhouse loans, and if they did they made the sound so unattractive that you didn’t want to due it. If I remember currently it went like this 12 year arm, 1 first year fixed at prime pluse 1 1/2 percent. The second year it could go up to 2% more, and each year after that with a cap of 13%. Who would do that one, there goal is to force you into there other programs. Help would be greatly apreciated, No problems with credit score or debt to income.

Thanks,
Lisa

Re: Advice - Posted by Allan

Posted by Allan on January 28, 2005 at 10:03:56:

No colllateral as in no capital? Do you own now? Do you have a 12-month mtg or rental history? How bad is your credit - later pays, judgements, liens, collections, bk, REO? Do you have stable income? Maybe, if you have some money to put down. 5% usually gets anyone financed. We’ll just have to get creative in structuring the transaction.

Allan Beraquit