How to buy 100% financed homes

[Jim Johnson]

Here is one way, I know there are many. I try to purchase my deals at an amount less than 80% LTV. So if a property will appraise for $100,000 I want to buy it for less than $80,000. I buy the home with hard money I actually loan myself, but you can use any hard money lender. Once closed, you have a ‘portfolio lender’ ( RBC or WAMU are examples) that will refi your home at 80% LTV without any seasoning. They refi the deal that appraises at $100,000 with… that’s right $80,000. Thus cashing out your purchase money first. The rates are much better on a 80% or less LTV loan so you win on many fronts. You need to make sure your lender is a out of the box thinker on this one if your going to use the same person for the purchase and the refi. FYI- I really try to be closer to 60 or 70 % LTV but that is another story...

[Dan Auito]

Cha-Ching! Now on top of what Jim just said. once you have done the above, you can also establish an equity line and withdraw more than you had in the deal in the first place! IF the properties income will support it!

[Jim Johnson]

Dan,
Your right. I left out the second part and want to add to it. Remember I said I loan myself the money for the original purchase. With those credit lines you can fund, short term your next purchase. Then with each refi you pay down your seconds again. I even loan others short term money to do this very same thing. Charge a few points, a few day of interest and you will eat out well every once in a while. Steak tonight babe, and not the chopped McDonald's kind...

Cha-Ching! Now on top of what Jim just said. once you have done the above, you can also establish an equity line and withdraw more than you had in the deal in the first place! IF the properties income will support it!

[Peach State Property Buyers]

Who is RBC? We currently have a hard money loan and need a non-seasoned refi. Thanks!

[Jim Johnson]

RBC is The "Royal Bank of Canada". These guys are bankers and wholesalers so you should be able to find their products is several ways. If you need the name and number of a loan broker that works all 50 states and has these programs let me know.
Jim

Who is RBC? We currently have a hard money loan and need a non-seasoned refi. Thanks!

[steyoung]

Jim. When you say that you buy the home with hard money you actually loan to yourself, what does that mean? Do you set it up as a formal loan? (not sure what I'm talking about here but...) or are you just using hard cash you have available in the bank?

Thanks,
Steve

btw: I'm new to this community and have been reading through many conversations over the last few hours - I'll introduce myself to everyone in a separate post.

[Jim Johnson]

Steve,
In most of the deals I will do in this fashion I am my own bank. I have a LLC set up as a lending institution. So one LLC loans me the money. Then I finance myself back out. But... it works with other investors just the same. I just would rather not pay the points for a overnight loan.

Jim

Jim. When you say that you buy the home with hard money you actually loan to yourself, what does that mean? Do you set it up as a formal loan? (not sure what I'm talking about here but...) or are you just using hard cash you have available in the bank?

Thanks,
Steve

btw: I'm new to this community and have been reading through many conversations over the last few hours - I'll introduce myself to everyone in a separate post.

[steyoung]

Jim. Could you send me the contact info for your loan broker. I'm very interested in this model.

Thanks,
Steve

(btw: I sent you a PM on this but I'm not sure if there's any notification?)


If you need the name and number of a loan broker that works all 50 states and has these programs let me know.
Jim

[Debbie]

Jim,
What is season/non-season mean?

I really hate to say this, but in your original post in this specific thread, it went over my head. I re-read it a few times and I still don't quite understand this statements:
"Once closed, you have a ‘portfolio lender’ ( RBC or WAMU are examples) that will refi your home at 80% LTV without any seasoning. They refi the deal that appraises at $100,000 with… that’s right $80,000. Thus cashing out your purchase money first. The rates are much better on a 80% or less LTV loan so you win on many fronts. You need to make sure your lender is a out of the box thinker on this one if your going to use the same person for the purchase and the refi".
This almost sounds like two separate mortgages, hence it went above my head. Would you re-phrase those statements or simplify for me?
Thanx. Debbie

[Jim Johnson]

Jim,
What is season/non-season mean?




I really hate to say this, but in your original post in this specific thread, it went over my head. I re-read it a few times and I still don't quite understand this statements:
"Once closed, you have a ‘portfolio lender’ ( RBC or WAMU are examples) that will refi your home at 80% LTV without any seasoning. They refi the deal that appraises at $100,000 with… that’s right $80,000. Thus cashing out your purchase money first. The rates are much better on a 80% or less LTV loan so you win on many fronts. You need to make sure your lender is a out of the box thinker on this one if your going to use the same person for the purchase and the refi".
This almost sounds like two separate mortgages, hence it went above my head. Would you re-phrase those statements or simplify for me?
Thanx. Debbie

A loan without seasoning is one that is new, or has not been in place for only a few days. Most lenders have rules about flipping houses these days. if the property has sold in the past X number of days (for some the "x" is 90 or 180) you can not resell it and get financing for the home. These are new "conforming loan" guidelines to prevent fraud. portfolio loans, those that are not sold on the secondary market under the fanny/fredie guidelines, will loan on most anything as long as the LTV is good, or the borrower is strong.

To address the lower section of your post, we are talking about two loans. one hard money loan at the full purchase price, and one for the same amount, but at 80% LTV, or of appraised value. On the second loan your interest rate will be much better, and the terms will be up to 30 years, where the hard money loan you bought the home with will be short term with high interest.

for example I bought the home for $80,000- financed at 100% of purchase price, so a $80,000 loan.

when I purchase the home, that is really worth $100.000 I got a appraisal for that $100,000.

Now... I get a loan on the same property at 80% LTV, or $80,000. Because this loan is a very different LTV than the first loan the risk is looked at very differently and the rates are lower.
This second loan is a refi and pays off the first hard money loan.

Same home, purchased with two loans, just figured two different ways, one on purchase price and one on appraised value.

I hope this helps...
Jim

If this did not clear up the post let me know....

[Debbie]

Jim,

Okay...it's a few minutes before bedtime, really physically tired from chasing after my 3 1/2 yrs old & 18 mos old girls all day, I think my brain is still registering information.....

In other words----you bought a property, with no down payment. Simply because it was not bought at it's appraised value. With time restraint, you run after the quickest way to buy the property, which is hard money (i.e. mortgage company, banker, etc). This would be called "unseasoned" loan". Right? It's for a very short term with higher interest rates due to it is not a "normal 5 to 30 yrs mortgage". Probably because, you don't want it in your name and put it in your entity (i.e. LLC, land trust, etc). Or, you can put your name on that mortgage. Soooo....
You bought the house 100%. Problem is, you don't like the short term nor the higher interest rate.....Since you already got the house appraised for the 1st mortgage, you decide to "aw, heck....I'm gonna find me a re-fi with longer term and lower interest rate so that way, I'll get a smaller mortgage payment as well as continue to escape from the PMI because it was 80% LTV to begin with". Plus, this would become a "seasoned loan"!. Do I have that right?
If I do have this right, GREAT!, although I have yet to figured how I now understand it.....Or, am I mistaken and that it is still going "over my head"?
Thank you (and forgive me, I'm falling asleep....ZZZZZZZZ).
Debbie

[Debbie]

In the middle of brushing my teeth @ bedtime, I just realized somthing.
Jim, you said you loaned yourself from one of your entities, right? That means, no real hard money from the mortgage company, banker, etc. Just a literal real hard money you touch from your entity. No interest, no mortgage, nothing. But then, you turn around and do a re-fi and get the $80K.
WOW!!!! That's why Dan said "Cha-ching!".....By golly, I think I got it.....
Boy, you're a sneaky way of doing that (legally, I'm sure).....Hmmm, I just now realized that I'm going to be up most of the night thinking $$$$$$$$$ and it's all your fault, Jim!!! I'm gonna be one mighty tired Mommy who'll let her little girls and two golden retrievers run around the house with one eyes closed.....Better get to bed now.......I'm rambling........Getting ready to log out.........ZZZZZZZZZZZZ

[Jim Johnson]

You have it right. Though the fact I can lend money and c ash myself out is really not important to the situation. The fact is, you can borrow all the money you need to purchase the home short term... then refi that "hard" money out with long term financing, paying off all the hard money and getting a great rate! It is having your cake and eating it too. Good luck with this little real estate investing tip!

Jim

In the middle of brushing my teeth @ bedtime, I just realized somthing.
Jim, you said you loaned yourself from one of your entities, right? That means, no real hard money from the mortgage company, banker, etc. Just a literal real hard money you touch from your entity. No interest, no mortgage, nothing. But then, you turn around and do a re-fi and get the $80K.
WOW!!!! That's why Dan said "Cha-ching!".....By golly, I think I got it.....
Boy, you're a sneaky way of doing that (legally, I'm sure).....Hmmm, I just now realized that I'm going to be up most of the night thinking $$$$$$$$$ and it's all your fault, Jim!!! I'm gonna be one mighty tired Mommy who'll let her little girls and two golden retrievers run around the house with one eyes closed.....Better get to bed now.......I'm rambling........Getting ready to log out.........ZZZZZZZZZZZZ

[steyoung]

Jim. Can you send me the contact details of the loan broker.

Thanks,
Steve


RBC is The "Royal Bank of Canada". These guys are bankers and wholesalers so you should be able to find their products is several ways. If you need the name and number of a loan broker that works all 50 states and has these programs let me know.
Jim

[Peach State Property Buyers]

John,
Can I have the mortgage broker contact info, as well. Thanks!

Angela

[NoCash]

Jim

Great advice. I have a question regarding pre-payment penalties. There are some HML who have pre-payment penalties, but I guess one could find a HML with no pre-payment penalties. Could you provide me contact information on HML's you've used, and that loan broker you used to refy.

Thanks

[Jim Johnson]

Some hard money people do have penalties... I lend the money to myself. So lender X (my hard money LLC) loans me money to buy a property. Then a conventional lender loans me money to pay off lender X. So I am short term borrowing the money from myself. No fees, no pre-payment etc. I just use my "just in case" savings to loan myself the money. There are other sources for the cash and I would tell you to find a local business man with a big wallet and show him/her your plan. Give them a few points for doing the loan and make the loan a 30 day call. Most good business people will see the value in overnight lending and jump at the chance to loan you the money. If your property is solid the deal will sell itself.
of note....
I only loan on local properties, with inverters I know. I never loan more than a couple of months and the deals have to really be sound.


Jim

Great advice. I have a question regarding pre-payment penalties. There are some HML who have pre-payment penalties, but I guess one could find a HML with no pre-payment penalties. Could you provide me contact information on HML's you've used, and that loan broker you used to refy.

Thanks

[Jim Johnson]

OK... here is my lender info. His name is Tom Larkin and he can be reached at 303-920-1052. He owns the company and is very honest so if your one to fudge the numbers to make your deals work .... well then he is not your man.

As for hard money, Tom also has hard money sources... though I use myself for all my hard money deals. I know it sounds funny but savings can really help your deals if you borrow to yourself and pay yourself back.