On a home loan where can I go to learn about the underwriting requirements for the homes condition. So when I look at a house that needs rehabbing I know which loan companies will loan against it and which ones will not.
Fannie Mae Homestyle
@Justin D. it is impossible to simply give you a blanket statement or point you to one place. To generalize, 203k and homestyle are what you would need if you think there is serious work needed on the house to close.
Fannie/Freddie and FHA, the typical loans, are going to stop you on a home that has any safety or structural issues. They are also going to stop you of there are integral parts of the home missing that would impact resale value and ability. You can't paint that with a broad stroke - hence why they require a full appraisal to be done on each loan. That process is meant to dig in deep on issues that could detrimentally affect the piece of collateral.
If there is nothing totally obvious - bad roof, bad foundation, mold, missing cabinets, etc, you should be able to do normal Fannie/Freddie/fha financing. If any of those things are a major issue, you need 203k, homestyle or Reno loan most likely.
@Justin D. Here are some links for those within the industry, but you can search the table of contents for the appraisal requirements.
Freddie Mac is substantially the same as Fannie Mae on the appraisal requirements. USDA is specific to your state or the state the property is in? You can google USDA guidelines and get to it that way. Happy hunting and cheers to you for wanting deeper knowledge of what is required. Most people wont go to that length, but if you do, knowledge is power or can be $$$$.
I've attend a lot of real estate investment groups were I live. I seen a lot of investors get homes under contract just a fumble on the home loan side. I believe this to be one of the key parts to real estate investing. This information will help deals go through more smoothly and quickly. Thank you for the information.
What information do you feel people should learn about on the loan side of real estate investing?
On the lending side they need to know about hard money and how to correctly account for the down payment, closing costs and reserves required. They also need to address the question of what happens when an unexpected cost comes up that is outside their budget for the rehab? Does that money come from the lender or the borrower or both?
I have an investor that is selling to one of my buyers right now. The deal on the sellers side was barely a decent deal until they found out the septic failed. In this case they must replace the septic with an expensive unit, 20K is the projected numbers. Now they are hoping they can get out of the deal without writing a check?
If your going to hold the deal as a rental of some kind after the rehab, then your going to need permanent financing of some kind? You must get to know the Fannie Freddie LTV's and rates and costs. You must get together with a lender that doesn't have any overlays or very few in this area, otherwise the guidelines can be problematic.
You must also know the community banks and credit unions and Non-QM lenders that will do loans to entities such as an LLC in the event that's the way you want to hold and finance these properties? Get to know their LTV's and terms and rates. Once you have your finger on all that, you now have the basic knowledge you will need to complete the refinance based on the way you need the financing structured.
You need a good lender on your team, one that is well versed in the challenges that investors face and how to resolve those challenges.
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