qualifying for 100% CLTV loans - Posted by rayrick

Posted by karp on April 02, 1999 at 14:52:06:

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qualifying for 100% CLTV loans - Posted by rayrick

Posted by rayrick on April 01, 1999 at 15:06:45:

I’m wondering about what’s involved in qualifying for 100%CLTV N.O.O loans, particularly when it involves a house that I can’t come close to affording the payments on. I’ve got a seller who owns a $370K house free and clear and it appears she will consider owner financing. I have excellent credit, a job, and I own a home, but certainly can’t afford the payments on this house. My thought was if I could get a 100% CLTV loan and then sell the house on a contract, I might be able to pocket a nice chunk of down payment money from my buyer and get some cash flow as well. Do you explain that this is your plan when you are qualifying, or does the bank not really give a hoot HOW you’re going to make the payments as long as they’ve got a reasonably low LTV loan?

A couple more questions on this house:
Is selling it on a contract a good approach here? Alternatively, I could turn around and sell with another 80-20 CLTV type of loan, but for a little more and with a higher rate on the second than I am paying to my seller. This would lower my risk since I would be in the middle of only the payment on the second and not the first as well.

How much time should I try and get from the seller before my first payment? This house is on the very upper end of the market in my area, but sounds spectacular. (I haven’t actually seen the place yet).

Thanks to all in advance.

-Ray

How’s this for a plan? - Posted by rayrick

Posted by rayrick on April 01, 1999 at 15:40:22:

I buy for $350K (she already said she would take this):
first mortgage: 250K
Seller second: 100K @ 8%

I sell for $370K:
Buyer’s first mortgage: 296K
I carry third: 74K @ 11.5%

This makes me break even on the cash flow, and I pocket $46K minus closing costs. Above depends on the house appraising for $370K. I suppose I also have to get seller to subordinate her second to my buyer’s new first in order to get the attractive 80-20 financing for my buyer. Thoughts? Criticisms?

-Ray

How’s this for a plan? - Posted by rayrick

Posted by rayrick on April 01, 1999 at 15:40:22:

I buy for $350K (she already said she would take this):
first mortgage: 250K
Seller second: 100K @ 8%

I sell for $370K:
Buyer’s first mortgage: 296K
I carry third: 74K @ 11.5%

This makes me break even on the cash flow, and I pocket $46K minus closing costs. Above depends on the house appraising for $370K. I suppose I also have to get seller to subordinate her second to my buyer’s new first in order to get the attractive 80-20 financing for my buyer. Thoughts? Criticisms?

-Ray

not bad…not too good. - Posted by karp

Posted by karp on April 01, 1999 at 15:46:05:

Hey Rayrick,

Quit Smiling! lol

UHM…

  1. you will not get a 100% LOAN on a non-owner occupied property.

  2. Even if there were said loan, you would not be able to qualify for it.

SO, having said that. If you think you can flip it to someone, do that. Why? It will lessen your risk, it will lessen your costs, it will keep a loam of your credit report.

It is my opinion that the idea of going to get a new loan so you can sell to somebody who can’t get a loan, is not usually the best approach…

Thanks,

karp

not bad…not too good. - Posted by karp

Posted by karp on April 01, 1999 at 15:46:05:

Hey Rayrick,

Quit Smiling! lol

UHM…

  1. you will not get a 100% LOAN on a non-owner occupied property.

  2. Even if there were said loan, you would not be able to qualify for it.

SO, having said that. If you think you can flip it to someone, do that. Why? It will lessen your risk, it will lessen your costs, it will keep a loam of your credit report.

It is my opinion that the idea of going to get a new loan so you can sell to somebody who can’t get a loan, is not usually the best approach…

Thanks,

karp

Well, if that plan was lame… - Posted by rayrick

Posted by rayrick on April 01, 1999 at 20:20:28:

…I’d love to hear what would be your favorite thing to do with an expensive house for which the seller wants close to full price but for which she would be willing to finance a significant percentage? Anything? Does it depend on the percentage?

You mention flipping it. Suppose I could get it for 50-70% cash with the seller carrying the balance. Is a 100% CLTV loan easy to get if it WILL be owner occupied? Could someone with marginal credit get such a loan? How low would the bank’s LTV need to be for a B credit buyer to qualify?

My thinking is if I could run an ad with verbiage like “Low Down, Seller will help, bruised credit OK” I might be able to generate enough interest to pull off a retail flip, so I’m asking whether the “bruised credit” part is a possibility if I set them up with 100% CLTV financing.

Let me ask you one more thing about financing, while we’re on the topic. Do lenders (other than hard money ones) pretty much always want to see income verification, regardless of how low the LTV is? Thanks.

-Ray

Re: not bad…not too good. - Posted by JohnBoy

Posted by JohnBoy on April 01, 1999 at 16:10:54:

You can get a 100% N.O.O. loan with an 80% 1st and a 20% seller carry back. However, the rate on that 1st will be around 11% - 11.99% and you will need to show that the property will cash flow.

Re: not bad…not too good. - Posted by JPiper

Posted by JPiper on April 01, 1999 at 16:06:32:

Just one point…there are lenders who will do 100% NOO loans (80/20).

JPiper

Now you’re talkin’! - Posted by karp

Posted by karp on April 01, 1999 at 21:05:35:

Rayrick,

Too many questions so I skimmed, but one thing you touched on is having an owner occupant buy it. I love this strategy and I do it often.

Example… today I had a preforeclosure client call me. She owes $4800 to bring her loan current and has that in the bank. Only one mortgage, a first for 74K. (not including missed payments and fees, etc)

However, she received the house as part of a divorce thingee a year ago and doesn’t think she can make the payments much longer.

I asked her what she wanted and her goal is just to be out from under it so she can use the 4800 she has saved to wipe out her debt and get a fresh start. I asked her if I took over her payments and brought the house current if taht would be enough to solve her problems.
“I think so,” she said. Our appointment is at 930am tomorrow.

I pulled comps and the house comes in at 110-115K. Now I can buy it for the back amount owed and retail it which may or may not take some time.

OR I can sell it 100% financing. 80% first, I carry a 20% second. I would walk with about 4K after expenses and a nice healthy 2nd. I could also sell the house in about an hour.

I am not sure which path to take but I have this newly formed fetish for carrying seconds. I call it “stacking” and I will tell you. the monthly payments add up.

Thanks,

karp

One option… - Posted by Jim Beavens

Posted by Jim Beavens on April 01, 1999 at 20:59:56:

Why mess with a lender?

Depending on what your definition of “significant” is when it comes to how much the owner will finance, buy the thing owner financed with a small down payment (say 5%), and then sell it on a wrap with a bigger down payment (say 10%), a higher interest rate, and a higher price.

Keep in mind that doing this with this size of a house would scare the dickens out of me as a fellow newbie just starting out. Putting $5,000 down on a $100K house is one thing, but you’re talking around $15-20K with these big jobbies. If you were able to negotiate enough time before the closing took place (say 2-3 months), then perhaps you could find a buyer before then and do a double closing so your down payment is covered by your new buyer, but it might be hard to persuade such a delay if the owner is already offering great terms.

I have to admit that I dream of one day doing deals on big beautiful houses like this, but not until I have some nice cash reserves to handle those large payments if necessary.

Just my opinion…

SHOW ME THE LENDER - Posted by karp

Posted by karp on April 01, 1999 at 23:44:39:

Are they national?
What is their name?

Thanks,

karp

Re: not bad…not too good. - Posted by johnman

Posted by johnman on April 01, 1999 at 18:22:50:

Hey Jim,
Sorry for sounding dumb but what is NOO? Do you have any nationwide lenders in mind or have dealt with?
Thanks dude!!!

Johnman

Re: not bad…not too good. - Posted by ruth

Posted by ruth on April 01, 1999 at 16:55:20:

what is aaaaaaa noo loan sounds good can I do that where I live HeHe!

Tell me… - Posted by Tyler

Posted by Tyler on April 02, 1999 at 01:35:50:

karp-

I’m currently structuring a deal quite similar to this. I’m wondering, having not done one of these yet, how hard it is for the buyer to get the 80% conventional without showing that they’re putting money down. My experience with your typical lender, they want (and will verify) adequate funds to make sure that it’s your money and not a gift.

So, tell me…are there tricks to doing the second, or have you experienced it to be easy for them to get the 80% loan, even though house will be fully leveraged??

Pass or fail? - Posted by Brandi_TX

Posted by Brandi_TX on April 02, 1999 at 01:10:22:

In regards to your second choice. Let me see if I have the order of events right here. Kind of a mental test to see if all of this is sinking in! LOL

You would tie up the house with a contract. Bring the loan current. Find a buyer and do a simultaneous close. New buyer brings 88k to the table. Out of that comes the sellers 74k loan. Leaving 14k to cover closing costs and to “reimburse” you for the back payments. You walk from the table with the change and a note for 22k.

IF I have this correct, is your contract with the seller an all cash one because you are certain that you can have it sold in an hour? And, are the back payments payed at closing to the bank with the payoff or do you do that ahead of time to make sure there is no more action from the bank?

Anywhere close?

Brandi_TX

Re: One option… - Posted by rayrick

Posted by rayrick on April 02, 1999 at 08:50:04:

Thanks for your suggestion, Jim. I had actually come around to this same approach myself as about the only way I would consider doing a deal on this house. Of course it hinges on the seller being willing to finance nearly the entire purchase. And you’re right, them’s some BIG payments to be messing with.

-Ray

Re: SHOW ME THE LENDER - Posted by JPiper

Posted by JPiper on April 02, 1999 at 02:13:57:

As of a couple of weeks ago New Century was doing an 80/20 NOO in Missouri. They are a nationwide lender, but whether they do this program nationwide I wouldn’t have a clue. Something to check out though for those that are interested.

JPiper

Re: SHOW ME THE LENDER - Posted by Tyler

Posted by Tyler on April 02, 1999 at 01:39:30:

…and forward it to me, too karp.

sounds reeeeeeeally good.

Re: not bad…not too good. - Posted by JPiper

Posted by JPiper on April 01, 1999 at 20:03:44:

I’d call a mortgage broker. At the moment the name escapes me that MY mortgage broker gave me, but if I’m not mistaken I think that North American offers this program. In any case, get a good mortgage broker…if they don’t have this program then go to another broker. If you aren’t able to locate a lender who will do this (I believe there are a number of them), then let me know…I’ll get the name for you.

JPiper

JPiper