Non-Md. deal needs bank from that state


September 30, 2001

Dear Mr. Azrael,

I want to buy a house in North Carolina for investment with the rent collected paying the mortgage.

I have 20 percent cash for a down payment and another $25,000 in a certificate of deposit, which matures in 18 months. I'm in between jobs [but] actually looking to start my own business.

Would it even be feasible to apply for a mortgage under these conditions?

Would I apply in Maryland or North Carolina?

Marie Plasko Laurel

Dear Ms. Plasko,

When lenders evaluate loan requests, they look at the value of the property in relation to the loan, the source of repayment of the loan and the borrower's credit.

Assuming your credit history is good and you have little or no debt, I think you should be able to get a loan for 75 percent or 80 percent of the purchase price. The source of repayment will be the rent you expect to get from the property. If necessary, you could pledge your certificate of deposit as additional collateral until the house is rented.

The best way to find out if a loan is feasible is to talk to a bank or financial institution that makes loans in North Carolina. Several Maryland banks - such as Bank of America and First Union - are based in North Carolina, so a call to their mortgage lending departments might be a good place to start.

You should also consider whether you can afford to buy this investment property and also start your own business. From what I've seen, a new business venture often takes a fair amount of start-up capital.

You may not have enough cash to meet both of your current objectives.

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