Santa Cruz, CA · Member since 2012 · 18 posts · 1 vote
I inherited a property and I am paying the mortgage which is in the estate name while I live in it and am doing the probate in pro per and am planning to renovate and rent it. In the meantime I'm educating and preparing myself to buy my first SFH. I am getting close to having a decent down payment ready for my purchase goals, and I can probably do even better with FHA. If I complete the probate first the property will be in my name, so will I still qualify for FHA? If not, should I try to delay completing my probate and buy the SFH with FHA first? It seems as if having the inherited property in my own name is one of the best assets I can have when applying for a mortgage loan but will that make me unqualified for FHA?
SFR Investor · Phoenix, AZ · Member since 2009 · 484 posts · 181 votes
13y
No, you can own a rental and qualify for FHA, but you need to declare that the purchased home is going to be your primary home. You may have to jump through a few hoops. No need to delay the probate.
SFR Investor · Phoenix, AZ · Member since 2009 · 484 posts · 181 votes
13y
No, you can own a rental and qualify for FHA, but you need to declare that the purchased home is going to be your primary home. You may have to jump through a few hoops. No need to delay the probate.
SFR Investor · Phoenix, AZ · Member since 2009 · 484 posts · 181 votes
13y
The biggest one will be "lender overlays" - rules that *arent* fha's that the bigger banks will impose.
My local bank had a big sign over the entrance touting their "investor loans" - when I inquired about rates, I was told they would only write investor loans for homes at least *thirty miles* from your primary residence. !?!
You will run into all kinds of weird & wacky rules. They may not want to count the income from your paid off rental if it hasn't been occupied by tenants for xx months.
Every bank will give you different rules & what your told when you apply may be different than what the underwriter will accept.
In my area, we have a local credit union that gives great rates & has underwriters who you can actually talk to if you want. They're in the building, not 500 miles away, and they answer their phones.
I'd network with others in your local area to find the banks that actually try to close deals. After dealing with my credit union, I'd never borrow from a mega-bank again. The difference in how smoothly things went was completely different than my experience with Chase.
Santa Cruz, CA · Member since 2012 · 18 posts · 1 vote
13y
Excellent information Mark, thanks again. Yeah, I have personal and business accounts with Chase right now but have been gradually pulling my money out from there and depositing it into a local credit union savings account for my down payment. Chase were the ones who told me I have to get a salary job to show a years salary on a W2 before they will ever consider me even though my self employment income is more than enough to cover the mortgage expenses I am applying for. I'm hoping these regular deposits with the credit union will help me get approved for a mortgage with them instead.
Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes
13y
Depends on what fha loan you're applying for. To qualify for first time home buyer's financing you can not have held title to any residential property for the past three years I believe it is. If the property is not in your name and you have no ownership interest in any residential property, you qualify. Exemptions can be made for the minor degree of ownership, held in a family.
If you take title through the estate, you won't be qualified for the 1st time programs. Other fha programs are still available. If you are assuming the debt, you'll be qualified with the debt.
Santa Cruz, CA · Member since 2012 · 18 posts · 1 vote
13y
Thanks for the reply Bill. That is exactly what I am concerned about. It is first time home buyer financing I am primarily interested in. As far as I can tell though, it is still totally legal for me to renovate and rent it even if it is not in my name. So perhaps is is in my interest to go ahead and get a salary job and buy my first SFH with first time byer FHA and transfer the inherited condo title later.
Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes
13y
The rule applies to being in title. I'd also ask your attorney as to having an ownership interest under state law as it may apply to your situation. Good luck!
Santa Cruz, CA · Member since 2012 · 18 posts · 1 vote
13y
I don't have an attorney. I've been slogging through doing the probate in pro per, myself. I will try to research that. Doing this probate has not been easy or fun, so I may just have to bite the bullet and hire an attorney. I've been trying to see how far I can get on my own though. Those attorneys dont come cheap and that's money I'd rather spend on an investment!
Involved In Real Estate · Jacksonville, FL · Member since 2012 · 216 posts · 42 votes
13y
You could try talking to a mortgage broker who does FHA loans. They know the rules pretty well and will advise just for the hope that you'll bring your business to them. Which you should if they take time help you.
Santa Cruz, CA · Member since 2012 · 18 posts · 1 vote
12y
Reviving this thread! Fast forward over a year since my original post:
I've gotten a great job and will have a year of good salary history by next month to satisfy the underwriters.
I renovated the condo and it now is rented generating $1000/mo cashflow profit.
I hired an attorney and the probate is close to being complete.
New factors, new questions:
I spent a lot of my would-be-downpayment savings renovating the condo and moving, renting a place to live etc. to get my job. Probates in CA are also very expensive and will need to pay the attorney another significant portion of would-be downpayment to complete the probate.
Because of this, I don't have 20% cash to put down on the expensive SFH's around here any more. At some point I had basically written off FHA for one reason or another, I think someone convinced me it wouldn't benefit me as much as I hoped.
The condo is still not in my name, I have enough of a downpayment and income for FHA requirements right now. This would be a great time to take advantage of it, but the probate will be done very soon, title in my name, no FHA.
Especially since the market has picked up, there is significant equity in the inherited condo (as well as increased probate fees based on proerty %) and not a lot left on the mortgage balance. Once the probate is complete I can refinance it and use the refi money as a downpayment on a place to live in. If I refi for a lot though, of course I'll lose that wonderful cashflow. On the other hand, I can refi for as much as possible and have enough to put down on a place to live AND another investment property or maybe even two, so I could potentially regain that rental cashflow.
How can I leverage this situation to my best advantage in order to buy a SFH to live in, and still retain (or increase!) rental cashflow, without being "house poor" and broke without cash?
- Should I really try to stall the probate now to try to get FHA benefits?
- Should I just forget FHA, finish the probate into my name, refi the condo, and move forward with the typical big 20% down payment, lose some rental cashflow from the inherited condo due to refi, and look for new income properties to invest in?
I know my questions are very general and hard to answer without doing the math. just want to buy a place to live as smart as possible, keep/grow cashflow income, and have comfortable security without overcomplicating things or taking big risks.
Lender · Greater LA/Orange County area, CA · Member since 2012 · 3k+ posts · 3k+ votes
12y
Close the probate. Stop worrying about everything, especially FHA. Letting lenders, let alone the government, dictate your plans is contra-entrepreneurial.
Learn marketing and how to attract deals. Do the ones you can and refer the others for a fee or piece if the deal.
Continue investing in yourself. Read and attend everything you can.
Hang with successful real estate people. Never miss an opp to buy a meal for an experienced RE investor. Don't be cheap about it.
Close the probate. Stop worrying about everything, especially FHA. Letting lenders, let alone the government, dictate your plans is contra-entrepreneurial.
Learn marketing and how to attract deals. Do the ones you can and refer the others for a fee or piece if the deal.
Continue investing in yourself. Read and attend everything you can.
Hang with successful real estate people. Never miss an opp to buy a meal for an experienced RE investor. Don't be cheap about it.
Remember to have fun and enjoy yourself.
Thanks for the reply and input Rick. Feeling hungry? You're absolutely right about not letting the gov't etc. dictate plans. I actually work in marketing although I'm sure real estate has its own criteria and there's much for me to learn. I'll try to attend more meetings and keep reading.
I just spoke with my attorney, probate final court date should be at the end of this month. After that, time to roll the property into my LLC, which I have already set up, and refinance. After refi, I'll be looking for a property to live in and hopefully more investments!
Lender · Greater LA/Orange County area, CA · Member since 2012 · 3k+ posts · 3k+ votes
12y
Suggest you start a new thread to discuss entities and financing.
Once transferred out of your name as an individual, conventional financing will not be an option. There may be property- and income- tax consequences, too.
Many people think asset protection is more important than, say, getting a loan. I say asset protection only becomes a problem when you have a lot to protect.
Again, suggest a new thread for you to get better feedback than I can offer.