Zero down, interest only mortgages for investors.
There's no doubt you've seen those infomercials on late-night television that tout "getting rich with no cash" by investing in real estate. In our opinion, the worst thing about these schemes is that a large number of them disclose a methodology for taking advantage of people who are enduring what might be tragic, financial circumstances through no fault of their own. The fact is, there are legitimate and effective financing programs available that take advantage of, or exploit, no person's financial problems.
The infomercials in question focus on schemes, many of which are foreclosure-related, where the owner has to be convinced, or sold on the idea to lend you their property's equity, or enter into a high risk (for the seller) deal with you. And although, there are a few sellers out there who are in situations making them naive or desperate enough to work with you, their properties often tend to be of lower quality.
Before proceeding, please note that we are focusing on investment (non-owner-occupied, NOO) properties. If you're looking to buy or refinance a primary residence or home, there are even more opportunities for owner occupied, zero-down mortgages with interest only payment options.
This passage is geared to the investor (especially beginners or novices) who want to start acquiring investment real estate. Unfortunately, your local banks typically want to see you make a down payment of at least 10%, %20%... up to 30% when buying investment (non-owner-occupied, NOO) properties.
Why do banks typically have such a high down payment requirement for investment properties? Because they are more risky. Also, because such down payments have been the norm, historically. Until the government got involved through FHA and Fannie Mae, down payments on owner-occupied purchases were equally as high.
Fortunately, a handful of niche, specialty lenders have stepped into the void to offer 100% financing programs to qualified borrowers and investors.
Zero-down (100%) and high-LTV (90%/95%) programs for investment properties tend to fall into two categories:
Concurrent 80/20 and 70/30 financing programs. These programs arrange two concurrent mortgages to acquire the property. Both mortgages are closed and disbursed at the closing. By splitting the financing between two investors, the risk exposure is also divided between the two investors.
Single 100% mortgage programs. A few lenders offer single loan program financing up to 100% of the purchase price. However, these programs are often limited to condominium units, single-family homes, townhouses and duplexes (two-unit properties).
Both programs tend to have similar program parameters. These programs also tend to take up to a week longer to process and close than standard mortgages... because lenders want to be more careful with mortgages where they will be assuming all of the risk.
Unfortunately, there is not much variety with these programs. Mainly because, there are only a handful of NOO lenders and not nearly as many non-owner mortgages available, as there are with lenders offering zero-down mortgages for owner occupied properties.
These mortgages have additional restrictions and requirements that typical home mortgages do not. Again, these additional requirements are due to the higher risks that lenders take on with these types of mortgages. Consider the three basic reasons why these programs increase a lender's risk exposure:
1). Lower or no down payment. Properties that are purchased with less down payment have higher default rates than properties purchased with greater down payments. The danger for lenders is even greater when the buyer makes no down payment at all.
2). Non-owner-occupied property. The default rate on investment (non-owner-occupied) properties tend to be higher than for mortgages on primary residences. People suffering an income crunch will normally place the priority on their home mortgage, rather than on the mortgage for their investment property.
3). Multi-unit. Mortgages on multi-unit properties tend to have higher default rates than mortgages on single-family homes.
The restrictions and requirements will vary from lender to lender who provide high, LTV mortgages to investors for non-owner occupied properties. Shopping for such mortgages can be very tedious, and may not ever yield the results you're looking or hoping for... rather than going from website to website searching for info that may not even be out there, sometimes it's smarter to talk with an NOO loan consultant, and maybe, even go as far as getting preapproved for an investor loan.
For more information about zero down, interest only, NOO programs for qualified borrowers, preapproval and more, please see: Mortgage Match
The infomercials in question focus on schemes, many of which are foreclosure-related, where the owner has to be convinced, or sold on the idea to lend you their property's equity, or enter into a high risk (for the seller) deal with you. And although, there are a few sellers out there who are in situations making them naive or desperate enough to work with you, their properties often tend to be of lower quality.
Before proceeding, please note that we are focusing on investment (non-owner-occupied, NOO) properties. If you're looking to buy or refinance a primary residence or home, there are even more opportunities for owner occupied, zero-down mortgages with interest only payment options.
This passage is geared to the investor (especially beginners or novices) who want to start acquiring investment real estate. Unfortunately, your local banks typically want to see you make a down payment of at least 10%, %20%... up to 30% when buying investment (non-owner-occupied, NOO) properties.
Why do banks typically have such a high down payment requirement for investment properties? Because they are more risky. Also, because such down payments have been the norm, historically. Until the government got involved through FHA and Fannie Mae, down payments on owner-occupied purchases were equally as high.
Fortunately, a handful of niche, specialty lenders have stepped into the void to offer 100% financing programs to qualified borrowers and investors.
Zero-down (100%) and high-LTV (90%/95%) programs for investment properties tend to fall into two categories:
Concurrent 80/20 and 70/30 financing programs. These programs arrange two concurrent mortgages to acquire the property. Both mortgages are closed and disbursed at the closing. By splitting the financing between two investors, the risk exposure is also divided between the two investors.
Single 100% mortgage programs. A few lenders offer single loan program financing up to 100% of the purchase price. However, these programs are often limited to condominium units, single-family homes, townhouses and duplexes (two-unit properties).
Both programs tend to have similar program parameters. These programs also tend to take up to a week longer to process and close than standard mortgages... because lenders want to be more careful with mortgages where they will be assuming all of the risk.
Unfortunately, there is not much variety with these programs. Mainly because, there are only a handful of NOO lenders and not nearly as many non-owner mortgages available, as there are with lenders offering zero-down mortgages for owner occupied properties.
These mortgages have additional restrictions and requirements that typical home mortgages do not. Again, these additional requirements are due to the higher risks that lenders take on with these types of mortgages. Consider the three basic reasons why these programs increase a lender's risk exposure:
1). Lower or no down payment. Properties that are purchased with less down payment have higher default rates than properties purchased with greater down payments. The danger for lenders is even greater when the buyer makes no down payment at all.
2). Non-owner-occupied property. The default rate on investment (non-owner-occupied) properties tend to be higher than for mortgages on primary residences. People suffering an income crunch will normally place the priority on their home mortgage, rather than on the mortgage for their investment property.
3). Multi-unit. Mortgages on multi-unit properties tend to have higher default rates than mortgages on single-family homes.
The restrictions and requirements will vary from lender to lender who provide high, LTV mortgages to investors for non-owner occupied properties. Shopping for such mortgages can be very tedious, and may not ever yield the results you're looking or hoping for... rather than going from website to website searching for info that may not even be out there, sometimes it's smarter to talk with an NOO loan consultant, and maybe, even go as far as getting preapproved for an investor loan.
For more information about zero down, interest only, NOO programs for qualified borrowers, preapproval and more, please see: Mortgage Match
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