What’s the Cheapest Loan Program in America?
Steve Bighaus, who has 29 years of experience in the mortgage industry and originates about 300 loans a year, is one of many speakers who will be presenting at the 1st annual Best Real Estate Investing Advice Ever Conference in Denver, CO February 24th to 25th.
In a conversation with Steve all the way back in 2015, he provided his Best Ever advice, which is a sneak preview of the information he will be presenting at the Best Ever conference.
What was Steve’s advice? He explained the cheapest loan an investor can get, as well as the two main requirements to qualify for that loan.
What’s the Cheapest Loan You Can Get?
Steve, like many other lenders, sells his loans to Fannie Mae. In a matter of fact, from January 2009 through December 2013, Fannie Mae provided about $4.1 trillion in liquidity, which equates to 3.7 home purchases and 12.3 million refinances. That’s a lot of loans!
That being said, when Steve originates loans, he must adhere to Fannie Mae guidelines. According to Steve, “I tell people where I like to be as far as minimum loan size is about $40,000. The majority of my competition won’t go below $50,000.”
“I’ve had situations where maybe the appraisal doesn’t come in, or maybe it’s a couple thousand dollars lower,” he continued. “I can actually go down to $30,000. But that’s where Fannie Mae just stops buying loans.”
So, what does this mean for us as investors? With the typical residential investment loan requiring a 20% a down payment, an investor can purchase an investment property for as little as $37,500 and qualify for a loan ($7,500 down payment + $30,000 loan).
Best Ever Advice: Credit and Cash
Steve’s Best Ever advice for real estate investors is to “maintain your credit and keep cash.”
As for as credit goes, Steve explained, “If you own less than 4 financed properties, minimum credit score is … closer to 640.” That is over 40 points below the US average (687).
As far as cash, Steve is referring to cash reserves. “You have to have 6-months principle, interest, taxes, and insurances (PITI) on the subject property. Then, if you own maybe another investment property, 2 months of that PITI.” Steve elaborated by saying, “if you want a primary residence, we don’t count the primary residence.” In other words, he requires the 6-month cash reserves for investment properties and second homes only.
Steve also add that “we can use a combination of cash and equity” to meet the cash reserves requirement.
The minimum loan that Fannie Mae will purchase from a lender is $30,000. So an investor can obtain a loan on a property that’s valued as low as $37,500.
In order to qualify for such a loan, you must have a credit score of at least 640 and cash reserves equal to 6-months principle, interest, taxes, and insurance on the subject property.
Want to learn more about real estate investment lending, as well as information on a wide range of other real estate niches? Attend the 1st Annual Best Ever Conference February 24–25 in Denver, CO. It’s the only real estate investing conference whose content and speakers are curated based on the expressed needs of the audience. Visit www.besteverconference.com to learn more!
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