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Hi all.
I am looking for lenders that will finance properties 5+ that work in Virginia. I am having a pretty hard time finding any banks that will finance property #5, as we already have 4 financed properties.
Does anyone know of any investor-friendly lenders that will work with me in Virginia? Good credit score, reserves, etc... so none of that stuff will be an issue.
Thanks!
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If you are asking the residential lenders at the bank who sell the notes, you're not going to get anything. You need to go across the hall to the commercial loan department, they should be telling you that. Different rules, loan termsand requirements. Also consider a credit union that holds the loan.
Another option for a commercial loan is to roll your properties over to a blanket loan making the deal worth while for the lender. Just make sure that you have a release fee to be paid down on the one loan so that each property will be released if it is sold. Good luck
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Are you in Northern Virginia? The reduction from 10 to 5 reminds me of the early 90's. I have a great lender, but it is Commercial (portfolio) and more expensive than conventional - but nowhere near hard money. 6% with a point for a 5yr fixed.
If you are in NoVA, pm me for the reference.
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Thanks all.
I was hoping to purchase a few more properties, hopefully up to 10, using conventional Fannie/Freddie financing, before I had to go the commercial approach. But, if the environment is pushing me that way, then I am definitely open to exploring it.
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I am in the same boat Nate, and so far I have not been able to find reasonable rates to finance the 5th property. I have missed out on 2 deals because of this, and I'm considering looking at commercial for exactly this reason. Let me know if you come up with something that works...
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I don't work on residential properties so I can't vouch for these lenders, but they will supposedly lend on more than 5 properties.
Stearns Lending
Sierra Pacific
Nationstar
Washington Federal
Flagstar
Everbank
Met Life
Hope that helps.
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I made a few calls. Met Life, Everbank, and Nationstar are all "NO" on investment property loans when you already have 4 or more financed properties.
I called Citibank to verify, and they reconfirmed that they they'll do loans up to 10, and today's 30yr investment property rate is very competitive at 5.125% with .25 points, $665 of bank fees (processing/underwriting), and max LTV of 70% on 2-4 unit properties (75% LTV max on SFR). This was based on a sample transaction I gave him of a $100k purchase.
I spoke to Tom at Citi's 1-800 number on their web site. He said that Citi follows FNMA guidelines with very few "overlays?. The overlays are the additional restrictions that most banks apply, one of which caps you at 4 financed properties. When you go over 4 loans, you do have to have 720 credit, 6 mths cash reserves on all your investment properties, and zero blemishes on your credit (i.e. nothing 30 days late in the past 12 mths).
U.S. Bank will do up to 6 in many area markets as well, if you call your local U.S. bank mortgage office.
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Thanks Darryl and David.
I actually called Citi Mortgage this morning too and was told that they will only do #5 - #10 if it is a primary residence, not an investment property. Of course, I had to prod to even get that information, so it could have just been the loan officer I spoke to. Did you get a direct number for Tom? He sounds more knowledgeable.
I will also check out the local U.S. Bank branch to see what they say.
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As far as I know, it goes deeper than # of mortgages. Last I heard, any rentals have to be "seasoned" two years for the rental income to count. In other words, it needs to be on your tax returns for 2 yrs.
I got the impression that the LO's don't want to deal with complex stuff. If anyone has an investor friendly lender, please let me know Otherwise, I'll pay my no-hassle 6% with a 5yr adjustment..
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Cheryl. What happens after 5 years with the commercial loans? Do you have to re-fi or does the lender just adjust the rate based on some index and give you another 5 years?
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Yes, they adjust. I'll be over the best conventional by about 1-1.5%. They will not be called and there won't be any new "qualification" required if you've met your obligations.
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Tom's direct line at Citi is 734-295-6613. He did sound like he knew the ins and outs. I had no connection to him prior to calling today.
I have called all the banks in my area, and have found 3 that will loan beyond 4 loans. Be sure to call ALL the smaller banks, savings banks, and S&L's. Some are "direct" to FNMA, or will have a particular investor on their roster, that will do the 5+ loans. To my knowledge, the 2 year requirement is stated in the FHLMC guidelines and pertains to your landlording experience (demonstrate that you have Sch. E income for the last two years on your returns), not a particular property.
If you're going to use bank products:
1. Make sure it's a 25-30 year ARM, not a balloon. If a bank gets overweighted in your loan type, has bad default experience, or gets a reprimand from its regulator, it can and will decline to renew your balloon loan, regardless of what the lender says up front. I've seen it in my market with some of the wobbly banks (they didn't look wobbly five years ago -- things change.)
2. Make sure it has a lifetime cap no more than 6 points above the inception rate (should also be a 2% annual increase hike).
3. Make sure that the net yield on your property (cap rate) is at least equal to this lifetime cap, and preferably a point or more higher.
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Great information everyone. Thanks so much for contributing.
I have been calling local banks and have heard no from all but one of them, but I still have several more on the list. Once I find a good one, I will work on establishing a banking relationship with them, which should help facilitate future loans.
I am going to put the commercial side in the back of my brain too in case I don't have good luck with conventional residential lenders or terms change again for the worse. I will definitely need it for properties 11+ anyway.
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