Find a mortgage broker
Again, it’s about leverage, and it’s about assessing what your net profit will be versus risk mitigation. So it is always better to go with a minimum of two lenders or brokers. Think of it as a kind of insurance policy. You don’t want to get stuck at the closing and pass up a deal valued at $50,000. You’re in the eleventh hour of a transaction, your lender wants you to close, the builder wants you to close, and suddenly you’re questioning the loan you have to close. Usually this was the direct result of lenders defaulting on the proposed loan, or perhaps a greedy and deceitful mortgage broker who suddenly wanted to charge three points, instead of the one point we had agreed to. Without delving into the fuselage of obscenities and threats flying around at this point in the deal cycle, things can get pretty ugly when brokers, lenders, and sales agents threaten to disrupt the very foundation on which you make a living.
So, be aware of your available loan options. You should know, for example, that most national lenders do not make loans that are 95 to 100 percent non-owner occupied. Rather, they typically do between 85 and 90 percent LTV. In keeping with that reality, familiarize yourself with the lenders who specialize in such loans. This can be particularly important as most investors who understand the physics of leverage (remember, leverage is the eighth wonder of the world) prefer to spread their investment dollars more evenly. It is not advisable to put all your eggs in one basket.
It is essential to know the importance of financial diversification in regards to the use of the balance of leverage. Find a lender that finances 95 to 100 percent of investment loans. This should be part of your investment arsenal dedicated to hunting for new homes. To find the best lender for your leverage needs and geographic location, I would recommend LendingTree.com and LenderLab.com. Also, try searching Google for investment lenders. Search engines are designed to serve lenders doing business in your geographic location, whether you are a national, regional, or local lender.
In terms of loan qualification, keep in mind that the qualification threshold for investment loans is a bit higher, as are the interest rates. But considering that the trade candidates are short-term dates when you’re “skimming the float” of appreciation, not long-term marriages, then a high interest rate on your loan is an acceptable compromise, given that the change is short term. retention period and will be resolved quickly. For example, the actual dollar amount differential for a 90% non-owner-occupied LTV loan at a 7.5% interest rate, compared to another lender offering a 100% non-owner-occupied LTV loan % at an interest rate of 9.5%, it’s about $250 to $300 per month for a $300,000 home. However, the difference in leveraged out-of-pocket expense on a 90 percent LTV/$300,000 home loan for the investor is $30,000! This is a big difference. Therefore, getting 100 percent LTV at a higher interest rate, with only an additional $250 to $300 per month out-of-pocket loss, is an acceptable and absorbable expense given that you have been given the opportunity to put zero, versus $30,000 down payment.
So, considering the length of ownership in an investment, which is four months at best, paying an extra $600 to $900 in total for three months of debt service isn’t a sacrifice. In this scenario, lenders are happy to lend, and most investors are happy to take the loan to execute on their short-term goal. As noted above, the goal of flip reversal is to skim the float. People really do make a living doing just that, and if you are able to engage the right degree of synchronicity with the various components needed for this formulation, you can make a living too.