should i bother looking for better pre approvals?

Question

hi everyone, been lurking here for awhile and decided to do my first real estate deal! i have the benefit of the VA loan and my friend that is on pretty much the same pay was given up to 350K loan with the VA loan, so i figured it would be easy for me to secure that financing and get a nice quadplex. boy was i wrong... the bank is only willing to give me a 150K loan (which is weird as i also have similiar credit to my buddy) and living in augusta georgia everything that is multifamily is very expensive and old. the cheapest duplex i could find was 180K and in disrepair, so i decided perhaps i could just buy a single family home and have roommates/ split the house/ ADU. but i can't even get quotes from local construction companies until i own the home apparently. so i don't think i can calculate the expenses until after i buy the home.

so based on the situation i'm reaching out for help on the forums. any advice is appreciated!

Philip Joseph · Answer

Tim,

Lots of advice on financing, so let me help address finding a contractor.  While you are getting your finances right, you should be visiting new home construction sites.  If a crew is currently working on the framing or roof, go and find out who is in charge and let him know you have some work coming and you will need to good contractor.  I've found good framers, roofers, plumbers, electricians, masons, sheetrock guys, and floor experts just from going to sites and asking around.  You cut out the middle man and build relationships with folks who likely have more time than the general contractor.

Zack Karp · Answer

@Tim Monistere welcome to BP!  Chances are, based on what you said, the loan officer you are working with doesn't know what they are doing when it comes to VA loans on 2-4 unit properties.  Or how to help you maximize your lending power.  Run...

Also your credit score did not drop 30 points from 2 inquiries, it had to be from something else, like your revolving balances changing.  If a mortgage lender pulls your credit, any other inquiries that are coded the same way do not affect your credit score for 30 days.

If you are potentially buying more than one 2-4 unit property (house hacking), there is a strategy to the order in which to use your VA benefit, FHA, and Conventional financing.  This is next-level strategy that you will not find working with bank LO's or call center LO's with the big online lenders.  Be sure to use someone who specializes in working with investors and VA lending, it will be a huge difference to your success.

TYFYS and best of luck!

Ronald Allen Barney · Answer

Shop around with other lenders or mortgage brokers.  If a guy with similar stats got 350k there's got to be a way to get that for you, assuming there isn't something significantly different with him income-wise or his cash on hand.

Also for MFH up to 4 units you can count the potential rent as income with FHA and probably VA as well (not 100% sure on the VA side).  Come to think of it try FHA and see if you can get a better financing deal.

Anne Turner · Answer

Are you talking to the same lender as your "buddy"?  Does he have a similar debt to income ratio?  That can really make a difference in what you qualify for.  Was he getting a home in the Augusta area?

When you are looking for a contractor in regard to a single family home, what is your end goal, to make it a duplex / quadplex?  You will need to check with zoning on that as there are very few areas that have that type of zoning.  You are definitely correct that there aren't too many of them out there and most are not in good shape.

Jack Rosenfeld · Answer

Agree with what Zack said above. Your credit score would not be as affected as you think by hard credit pulls. It is 3 points max. And if it is coming from the same industry within a 45-day period, it is not affected multiple times. Something else must be on there. It might be good to talk to someone that works with FICO scores to walk you through the reason for the big drop. Also, remember that you have three scores and the scores you see through consumer companies like Credit Karma do not necessarily matchup with what the lenders are seeing.

David M. · Answer

@Tim Monistere

Are your financial situations the same????  You only mentioned credit score.  Do you realize you still need the the income to justify the loan?  What about any existing debts?

Mark F. · Answer

and @Tim Monistere if you are in an are the @Zack Karp works in I highly recommend him, I've used him several times personally (15-20 I believe), he and his time are top notch, you won't be disappointed.

Mark

Zack Karp · Answer

NOOO not hard money.  Stay away if you can.  You need an investor-friendly loan officer who knows how to help you navigate VA, FHA, and Conventional lending through house hacking.  Assuming you are trying to buy multiple MFH's with low/no down payments.

Tim Monistere · Answer

@Zack Karp hey thanks for the advice! i'll definitely look around for better financing options then. honestly i would like to buy more than one rental property eventually using the VA, and FHA loan, but when you say investors or VA lending, who do you mean? hard money lenders?

Tim Monistere · Answer

not a bad idea, i was insistent on trying to use the VA loan but if it means a better deal trying FHA maybe i can do that. only issue is every inquiry hurts my credit score. used to be a 720 and now it's a 690 after just 2 inquiries. pretty annoying.

should i bother looking for better pre approvals?

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