First loan app but no funds

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First loan app but no funds

Henderson Silva
Newark, NJ · Member since 2015 · 25 posts · 2 votes

so i implied for my first loan. It looks like i would be approved for a 170 thousand loan, but i need to have the 6000 in funds for a down payment. I dont have it and they won't accept friend's gift, it has to be a family member for the fha. The closing cost can be covered by the seller so i only need the 6000 and I'm stuck. I will be eligible for a VA loan 6 months from now, but i wanted to use the fha loan first so when i get the second property i could use the va loan and avoid the 20 to 25% down payment. Here is the email that i just got from navy federal>>>>>>>>>>>>>>>>>>>>

If you can obtain the $6,000 in funds from a family member, then I will update your application with that information and then send it for a pre-approval decision with a revised purchase price of $170,000. Also, could you please provide an expected end date for your service in the reserves?

If you do expect to be able to proceed with this application, then please plan to provide the items listed below to expedite the loan process:

1. Most recent pay stub(s) showing at least 30 days of year-to-date earnings
2. Most recent month end bank statement(s) and/or retirement account statements (all consecutive pages) showing assets to cover down payment and closing costs
3. W2s for 2013 and 2014
4. Legible copy of driver license and social security card

I am also attaching the following forms that you will need to complete and return ASAP:

5. 4506T (request for tax transcripts)
6. SSA-89 (Social Security verification)
7. Borrower Signature Authorization




Please, sign and return the documents

What do you guys think? Try to save the money within the next 3 months and apply again or wait and use the va loan? 

I really wanted my fha first plan to work.

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Christopher Brainard
Rental Property Investor · Rockwall, TX · Member since 2015 · 891 posts · 701 votes
10y

No offense, but if you don't have 3% to close on a deal, you probably shouldn't be looking to purchase real estate. You would be better served educating yourself on personal finance and working out a plan to set aside an emergency fund and save for your 1st home.

-Christopher

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  • Brian Gibbons
    Investor · Sherman Oaks, CA · Member since 2008 · 6k+ posts · 3k+ votes
    10y
    Originally posted by @Matt Motil:
    Originally posted by @Henderson Silva:
    Originally posted by @Charlie Fitzgerald:

    You also will not be able to have an FHA loan and a VA loan at the same time. Switch the current Loan to a no down VA, have the seller cover all closing costs and it take a little higher rate to pay for some of them if you have to. Get a home that has a llower payment than renting and SAVE the difference.

     That's interesting. . So i can not get a va loan if i have an fha loan? What i was planning to do is use the fha loan first and after a year of the required minimum apply for a va loan and move to the va loan house. So what you are saying is that even after a year in the fha loan house i cant get a va loan?

    After the year, refi the FHA loan into a conventional mortgage (assuming you have descent credit - and if you don't, work on it over the year). After you refi into a conventional mortgage, move out and buy another property to live in using FHA or VA financing.

    As for the down payment, how fast do you need it? 3 months? $2000/month = $500/week. Can you get a second job? borrow money from a relative (even offering them interest)? 

    Can you drive your car for Uber in the evening or on weekends? 

    When you have no money is when you need to get creative. Right now is when you will learn one of the greatest lessons in investing: How to raise capital fast when you need it. 

    It's time to get creative, lace up the boot straps and get out there and get the money you need. When you start turning over every rock and option, you'll figure it out. 

     Awesome post on getting motivated to make more money for real estate. Cut expenses or get a second job or both!

    Merry Christmas Matt!

    0Reply
  • Jeff S.
    Colorado Springs, CO · Member since 2015 · 98 posts · 59 votes
    10y

    Hi Henderson, 

    Apart from the technical issues of getting the loan, you really need to be realistic about being a first-time home owner: it takes money.  Living in a house means that *you* have to take care of everything.  Apart from the big  what-ifs (HVC, roof,... ) you also have to clean gutters, mow grass, fix holes in the wall, etc.

    Do you own a lawnmower, hoses, ladders, power tools, all the stuff you need for patching and painting ? The list goes on and on. When I got my first house I was amazed at how much new "stuff" I had to buy.  In the long run home ownership is a great deal, but at first there's a lot of unexpected costs.  Even if everything goes right (fingers crossed) you should still have cash for the little things - there are a *lot* of little things.

    1Reply
  • Matt Motil
    Rental Property Investor · Cleveland, OH · Member since 2015 · 1k+ posts · 880 votes
    10y
    Originally posted by @Brian Gibbons:

     Awesome post on getting motivated to make more money for real estate. Cut expenses or get a second job or both!

    Merry Christmas Matt!

     Thanks, Brian! Same to you

    0Reply
  • Mark Ferguson
    Flipper/Rehabber · Greeley, CO · Member since 2013 · 2k+ posts · 1k+ votes
    10y

    Conventional loans have down payments as low as FHA now with lower mortgage insurance. Have you looked into conventional owner occupied?

    0Reply
  • Mark Ferguson
    Flipper/Rehabber · Greeley, CO · Member since 2013 · 2k+ posts · 1k+ votes
    10y
    Originally posted by @Charlie Fitzgerald:

    The other misinterpretation you are making here is that the requirement for the FHA loan, or the VA loan is that you live in it for 1 year...and then you can do whatever you want. That's not factual. What the requirement says is that you must occupy the home "for the majority of the calendar year" meaning every calendar year that you own the home...not, just the 1st year. Gov't backed loans are NOT intended to be made available for people to build rental real estate portfolios folks. (With the exception of using them to buy multi-family housing which you are going to occupy AND rent out other units in). They are intended to assist Veterans and lower income families with acquiring a primary residence for themselves and their families.

     Did this rule change recently? 

    "FHA loan rules for single family home loans found in HUD 4155.1 do list occupancy requirements. According to Chapter Four:

    At least one borrower must occupy the property and sign the security instrument and the mortgage note in order for the property to be considered owner-occupied. FHA security instruments require a borrower to establish bona fide occupancy in a home as the borrower's principal residence within 60 days of signing the security instrument, with continued occupancy for at least one year."

    I am a HUD listing broker and the HUD requirements for owner occupants is one year. They are very clear in that regard and seeing that HUD is pretty much FHA I would think they would be on the same page. and this information seems to state the requirement is one year as well.

    Okay I found the exact spot in the FHA guidebook

    4155.1 4.B.2.b FHA Requirement for Establishing Owner Occupancy At least one borrower must occupy the property and sign the security instrument and the mortgage note in order for the property to be considered owner-occupied. FHA security instruments require a borrower to establish bona fide occupancy in a home as the borrower's principal residence within 60 days of signing the security instrument, with continued occupancy for at least one year.

    0Reply
  • Charlie Fitzgerald
    Lender · Las Vegas, NV · Member since 2015 · 2k+ posts · 1k+ votes
    10y

    If the intent is to use the loan for the purchase of a property that you will live in for one year and convert to a rental and then get another gov't backed loan and do the same thing, you are not meeting the requirement to "require a borrower to establish bona fide occupancy in a home as the borrower’s principal residence." 

    You can split the hair where ever you want.  Intent is what it is...

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  • Mark Ferguson
    Flipper/Rehabber · Greeley, CO · Member since 2013 · 2k+ posts · 1k+ votes
    10y
    Originally posted by @Charlie Fitzgerald:

    If the intent is to use the loan for the purchase of a property that you will live in for one year and convert to a rental and then get another gov't backed loan and do the same thing, you are not meeting the requirement to "require a borrower to establish bona fide occupancy in a home as the borrower’s principal residence." 

    You can split the hair where ever you want.  Intent is what it is...

     Isn't the governments definition of Bona fide occupancy moving in after 60 days and living there one year? I fail to see how doing exactly what is required by hud in writing is loan fraud. 

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  • Charlie Fitzgerald
    Lender · Las Vegas, NV · Member since 2015 · 2k+ posts · 1k+ votes
    10y

    Bona fide occupancy as a personal residency...

    Next time you have a buyer that wants to buy a house using a govt loan and intends to move out in 12 months and rent the house out and then apply for another govt backed loan to do the same thing, just disclose that at time of application as your plan.  Then you will not fail to see ...

    1Reply
  • Donald Miller
    Henderson, NV · Member since 2015 · 23 posts · 2 votes
    10y

    I'm new here but just bought a home in Henderson using my V.A. loan. It cost me total of 2k to move in. If you have any service connected disability the mortgage brokers can wave the V.A. funding fee. I bought this house to potentially rent out after the year requirement to live in it. It is much cheaper for you to use the V.A. but I agree that you need some emergency funds. Why not use your V.A. to buy a place and save up for the next place?

    0Reply
  • Henderson Silva
    OP
    Newark, NJ · Member since 2015 · 25 posts · 2 votes
    10y
    Originally posted by @Donald Miller:

    I'm new here but just bought a home in Henderson using my V.A. loan. It cost me total of 2k to move in. If you have any service connected disability the mortgage brokers can wave the V.A. funding fee. I bought this house to potentially rent out after the year requirement to live in it. It is much cheaper for you to use the V.A. but I agree that you need some emergency funds. Why not use your V.A. to buy a place and save up for the next place?

     Definitely. .. but i will only be eligible in 7 months

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  • Account Closed
    Investor · Central Valley, CA · Member since 2012 · 6k+ posts · 3k+ votes
    10y
    Originally posted by @Charlie Fitzgerald:

    A federally-backed home loan is intended for use by a borrower who occupies the house as a primary residence. FHA and VA prohibit investors from using the loans to acquire income properties. A veteran, or qualified family member such as the unmarried widow of a deceased veteran, can obtain one loan type initially, and the other loan type on a different property, in the future, without having to pay off the prior loan. In such a case, the veteran would have both loans at the same time.

    A principal residence is defined as a home in which the borrower intends to reside for a majority of the calendar year. A veteran cannot obtain a VA and FHA loan at the same time with the intention to live in both as an owner-occupant. Lenders typically include an affidavit or certification in their loan documents that the borrower must sign, verifying that the home will be owner-occupied. A veteran who intentionally deceives the lender and federal government by obtaining the loans under false pretenses risks having to repay the loans immediately, foreclosure by the lender and possibly federal criminal charges.

    So, while it is not impossible to get an FHA loan on a home you declare as a primary residence, and then at some point in the future, buy another home that you declare as a primary residence using your VA benefits, unless there are justifiable mitigating circumstances for doing so, you are in fact committing loan fraud and are liable for these actions.

    Thanks for clarifying and for including the info about the VA OO affidavit. I find that many people sign such affidavits without thinking much about them. To be fair, loan and escrow docs are endless and it's easy just to sign what is put in front of you. I have friends who have signed OO statements in order to get good loan rates. We have people here on BP who openly admit to applying for FHA loans without intention to occupy. I have had more than one seller want me to buy their properties via short sale, and rent back or resell to them. When I point out the affidavit that will be part of the sale, the one that says there is no rent back or side deal (you know, cause the lender is agreeing to take a hit), they say they have no problem. I do though. Not because I'm a goody two shoes. But because loan fraud is a federal offense. Not worth the risk IMO

    1Reply
  • Account Closed
    Investor · Central Valley, CA · Member since 2012 · 6k+ posts · 3k+ votes
    10y
    Originally posted by @Mark Ferguson:

    Conventional loans have down payments as low as FHA now with lower mortgage insurance. Have you looked into conventional owner occupied?

     Curious, what conventional product has a 3% down?

    0Reply
  • Account Closed
    Investor · Central Valley, CA · Member since 2012 · 6k+ posts · 3k+ votes
    10y
    0Reply
  • Account Closed
    Investor · Central Valley, CA · Member since 2012 · 6k+ posts · 3k+ votes
    10y
    0Reply
  • Mark Ferguson
    Flipper/Rehabber · Greeley, CO · Member since 2013 · 2k+ posts · 1k+ votes
    10y
    Originally posted by @Account Closed:
    Originally posted by @Mark Ferguson:

    Conventional loans have down payments as low as FHA now with lower mortgage insurance. Have you looked into conventional owner occupied?

     Curious, what conventional product has a 3% down?

     http://themortgagereports.com/12603/conventional-97-mortgage-loan-guidelines-plus-mortgage-rates

    0Reply
  • Darrell Shepherd
    Rehabber · Smyrna, GA · Member since 2013 · 864 posts · 510 votes
    10y

    Its been years since I've done conventional financing, but you said they'd accept a gift from a family member, but not a friend.  Does this mean you have a friend willing to spot you the $6k?

    If so, is there any reason that friend couldn't give it to the family member who then gives it to you?  I cant imagine them sourcing or requiring the family member gift.  When I bought my first house (almost 20 years ago), all we did was a letter from my father in law saying we didn't have to pay the money back.

    0Reply
  • Account Closed
    Investor · Central Valley, CA · Member since 2012 · 6k+ posts · 3k+ votes
    10y
    Originally posted by @Mark Ferguson:
    Originally posted by @Account Closed:
    Originally posted by @Mark Ferguson:

    Conventional loans have down payments as low as FHA now with lower mortgage insurance. Have you looked into conventional owner occupied?

     Curious, what conventional product has a 3% down?

     http://themortgagereports.com/12603/conventional-97-mortgage-loan-guidelines-plus-mortgage-rates

    Thanks Mark! Good stuff on Conventional 97, which I had never heard of.  Probably because the minimum credit score is 740 when using gift downpayment funds....not something I see a lot.  However the 680 required for borrowers with their own down is doable.

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  • Account Closed
    Investor · Central Valley, CA · Member since 2012 · 6k+ posts · 3k+ votes
    10y
    Originally posted by @Darrell Shepherd:

    Its been years since I've done conventional financing, but you said they'd accept a gift from a family member, but not a friend.  Does this mean you have a friend willing to spot you the $6k?

    If so, is there any reason that friend couldn't give it to the family member who then gives it to you?  I cant imagine them sourcing or requiring the family member gift.  When I bought my first house (almost 20 years ago), all we did was a letter from my father in law saying we didn't have to pay the money back.

    That was my first thought too.  The gift DP requirement that it be from a family member seems so vague and and not provable.  Must be a government operation. :)

    0Reply
  • Mark Ferguson
    Flipper/Rehabber · Greeley, CO · Member since 2013 · 2k+ posts · 1k+ votes
    10y
    Originally posted by @Account Closed:
    Originally posted by @Mark Ferguson:
    Originally posted by @Account Closed:
    Originally posted by @Mark Ferguson:

    Conventional loans have down payments as low as FHA now with lower mortgage insurance. Have you looked into conventional owner occupied?

     Curious, what conventional product has a 3% down?

     http://themortgagereports.com/12603/conventional-97-mortgage-loan-guidelines-plus-mortgage-rates

    Thanks Mark! Good stuff on Conventional 97, which I had never heard of.  Probably because the minimum credit score is 740 when using gift downpayment funds....not something I see a lot.  However the 680 required for borrowers with their own down is doable.

     I know a lot of lenders. Almost all of them suggest conventional over fha now for owner occupants if they have the right credit score. 

    0Reply
  • Account Closed
    Indianapolis, IN · Member since 2015 · 15 posts · 14 votes
    10y
    Originally posted by @Charlie Fitzgerald:

    What the requirement says is that you must occupy the home "for the majority of the calendar year" meaning every calendar year that you own the home...not, just the 1st year. 

    I see you have quotations around "for the majority of the calendar year". Where did you find this information? Im also interested in getting a 203k FHA loan for a fixer. I also was under the impression that a year was required to live in.

    0Reply
  • Melissa Szanati
    Real Estate Agent · Chicago, IL · Member since 2015 · 26 posts · 5 votes
    10y

    If you have a friend willing to gift you the money...can they gift it to someone in your family and then that family member gifts it to you? 

    I'm sure there's a rule about that, but that seems like the easiest option if there isn't a rule 

    1Reply
  • Chi Kanu
    Wholesaler · Trenton, NJ · Member since 2015 · 21 posts · 4 votes
    10y

    They are going to source the money. Between the year 2000 and 2006, the gifting requirement was not as stringent, but now with money laundering, terrorist activities, everything is sourced. They are going to request whoever gifted you to produce their bank statement, showing the money came from their bank account and that it was seasoned. It used to be that a letter from whomever in those days would do it, not anymore.

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