100% LTV loans are all the rage in the real estate investment world right now. Here’s why. A 100% LTV loan means you can borrow the entire purchase price of a property. This is a great option for investors who don’t have a lot of cash on hand but want to buy property anyway. There are some qualifications and requirements you’ll need to meet in order to get a 100% LTV loan, but they aren’t too difficult to satisfy. We’ll discuss these more in depth in this article along with much more about how to get a 100% LTV loan.
What are 100% LTV Loans and Why Are They Great for Real Estate?
A 100% LTV loan is a mortgage loan that finances the entire purchase price of a property. This type of loan is also referred to as “all-in financing” because the borrower doesn’t have to bring any cash to closing. 100% LTV loans are a great option for investors because they allow you to buy a property with no money down.
There are several benefits to getting a 100% LTV loan:
- You can buy a property without any money out of pocket.
- You can use the equity in the property as collateral for the loan.
- You can usually finance rehab costs as well.
Why Are 100% LTV Loans Great for Real Estate Investors?
This can be an especially helpful loan for new investors who don’t have a lot of money saved up. Without a lot of cash on hand, your buying power is often limited by down payments. This makes it difficult to scale your real estate business quickly. In order to get your investment out of the property, you’d either have to sell or refinance out. Refinancing often requires a hold period of as much as one year or more. This can be a big obstacle if you’re trying to start a new business.
It’s also helpful if you’re looking to buy a property in need of repair. You can often include the cost of repairs in the loan amount. This is a great way to rehab a property without having to come up with the money yourself.
How to Get a 100% LTV Loan on Real Estate?
There are a few different ways to get 100% LTV financing on real estate. The best way will depend on your individual situation and what you’re looking for in a loan.
- One option is to find a seller who is willing to carry back a second mortgage. This is often referred to as a “seller carry-back” or “owner financing.” The seller becomes the bank and loans you the money to buy the property. This can be a great option if you’re having trouble qualifying for a loan from a traditional lender.
- Another option is to find a hard money lender who specializes in 100% LTV loans. Hard money lenders are private individuals or companies who lend money based on the value of the property, not your credit score. This can be a great option if you have bad credit or if you’re looking for a short-term loan.
- You could also get a loan from the government through programs like the FHA 203k loan. These loans are designed to help people buy and renovate properties. You can borrow up to 110% of the purchase price and use the extra 10% for repairs.
Recommended Reading: How to Approach a Hard Money Lender
Is Getting a 100% LTV Loan a Smart Decision?
Now that you know a little more about 100% LTV loans, you may be wondering if this is the right type of loan for you. The answer to this question depends on your individual situation.
If you’re a new investor with limited funds, a 100% LTV loan can help you get started in the world of real estate investing. This type of loan can also be helpful if you’re looking to buy a property in need of repair.
However, there are some risks to consider before taking out a 100% LTV loan. One of the biggest risks is that you could end up upside down on your loan. This means you owe more money than the property is worth. This can happen if the property values decrease or if the repairs end up costing more than you anticipated.
Another risk to consider is that you may have a hard time finding a traditional lender who will refinance your loan. If your property ends up appraising for less than you anticipated or got the loan for, you’l have to come out of pocket. If you need to sell the property before the end of the loan term, you may have to find a private buyer who is willing to pay the full loan amount.
Before taking out a 100% LTV loan, be sure to consider all of the risks and decide if this type of loan is right for you.
What Qualifications and Requirements Will Hard Money Lenders Look For?
Hard money lenders will look at a variety of things when issuing 100% construction loans or rehab loans. Here are some of the most common:
- The borrower’s experience
- The type of property
- The location of the property
- The loan purpose
- The exit strategy
- The After Repair Value (ARV)
In Conclusion – How to Get a 100% LTV Loan
100% LTV loans are loans that finance the entire purchase price of a property. There are a few different ways to get one of these loans, including through a seller carry-back or a hard money lender. 100% LTV loans can be a great financing tool for new investors or for properties in need of repair. If you’re considering this type of loan, be sure to weigh the risks and benefits carefully.
Hopefully this article answers all of your questions about how to get a 100% LTV loan. Thanks for reading!
How to Get a 100% LTV Loan FAQs
Which bank is best for construction loans?
The best bank for construction loans will vary depending on your individual situation. Talk to a loan officer to see what options are available to you.
What is the minimum credit score for a 100% LTV construction loan?
There is no set minimum credit score for a construction loan, but most lenders will look at your credit history when considering you for a loan. 600+ is a common minimum.
What is the interest rate on a 100% LTV loan?
Interest rates for 100% LTV loans will vary depending on the lender and your individual situation. Don’t be surprised to see rates around 1% per month.