What kind of lender do I need when the bank turned me down?

As you have found, it is nearly impossible to get traditional mortgage financing for such a low loan amount. The reason is that your state (all states) has capped how much a lender can charge in fees to a certain percentage of the loan amount, and at 25k the fees allowed will not come anywhere near covering the costs for the bank to originate that loan for you. I reality, they could charge over that limit but you would then have a "high-cost" loan which is very strictly regulated and the bank would likely not find any investor to purchase a high-cost loan on the secondary market, so they would be stuck toting the note for 30 years.

You will need to seek out alternative sources outside standard mortgage lending. If you borrow from family or friends, you have to be very careful to have it fully documented and expectations of repayment set, as this can cause all sorts of difficulties. You would probably not do this, but some people would not be as diligent in repaying family if things got a little tight one month.

Because it is a short sale, it is unlikely that the current owners are going to be in a position to finance it for you, and the current lender (if they approve the short sale) will not want to help (mostly for the same reason your bank turned it down).

I don't know if your income would support it, but could your bank offer you a 25,000 unsecured line of credit (sometimes called a signature loan)? That is like a credit card, but you might only pay around 6% interest on that as opposed to higher credit card fees. Higher rate than a mortgage, but you can probably pay that loan off quickly.

Hope it works out.

1. Speak to the current owners to see if you can work with them.

2. Check out a local credit union

3. We actually bought our first house on our credit card with a 0% cash advance. Perhaps it is something you can do as well.

4. Talk to family members and see if they will go in on the deal and invest $5k or $10k each. Make sure you have a contract with them that spells out everything!!

5. Definitely speak to multiple lenders. Surely one will want to lend on it.

6. Talk to the company you work for and see if they are willing to help.

$25k is incredibly cheap for a duplex and really not a lot of money in the grand scope of duplex buying (where we live you can't find a duplex for under $600k). I am not sure where in the world the units are, but I know you can figure out a way to make it happen. Just make sure you don't get involved in anything you don't feel good about.

Go to a different bank.