The possible lending option for property purchase?

4 Replies

Hello,

I am in a contract a quad-flex property D priced 225k - inspection is completed, and in the middle of finding a lender. I've already spoken with my local lender but I realized I am short in down payment of 25%(around 20-30k to be safe). I wanted to get some cash out (around 100k, a month ago) as a BRRRR from my two investment properties, and used them as a down payment. However, that plan did not work out. The appraiser valued those properties for around my purchase price (which was 27k and 33k.).

Planned

Outcome

Current house A

Value 260k, equity 140k left

Paid off HELOC 40k

Outstanding balance

Investment B

Zestimate 70k, appraised 33k

Cash out finance

Not worked due to appraisal

Investment C

Zestimate 60k, appraised 27k

Cash out finance

Not worked due to appraisal

Investment D

Listed 235k, lowered to 225k

My loan officer advised me to cash out refinance my current house A to purchase quad-flex D. Since I have around 140k equity, that should be enough to cover my down payment and others can be used my future property purchase.

My initial intention was to purchase D using refi money from B and C. However, I think I need to focus on repairing those two before submitting another loan application. Partially roof repairing is done. I need to do more flooring and other little minor work.

At this time, my local lender advised me to refi current house A to cash out 75% with 3.2% 15 year loan. That would cover to pay my current loan (3% 15 year, 5.5% HELOC, and etc.). Before proceeding, I want to confirm with you guys if my thinking strategy sounds ok.

Any advice on this matter is greatly appreciated!!

Thanks,

G

Originally posted by @Paul Defngin :

Sounds like a good plan but why go on a 15 year? Why not a 30Y where you have the flexibility to prepay as you see fit?  Also why not go 80% on the primary instead of 75%? 


I have been paying 15 year because it shows better interest rate as well as more equity it will generate. I would definitely do 30 year option for my investments though.

Originally posted by @Grace Fukuda :

Hello,

I am in a contract a quad-flex property D priced 225k - inspection is completed, and in the middle of finding a lender. I've already spoken with my local lender but I realized I am short in down payment of 25%(around 20-30k to be safe). I wanted to get some cash out (around 100k, a month ago) as a BRRRR from my two investment properties, and used them as a down payment. However, that plan did not work out. The appraiser valued those properties for around my purchase price (which was 27k and 33k.).

Planned

Outcome

Current house A

Value 260k, equity 140k left

Paid off HELOC 40k

Outstanding balance

Investment B

Zestimate 70k, appraised 33k

Cash out finance

Not worked due to appraisal

Investment C

Zestimate 60k, appraised 27k

Cash out finance

Not worked due to appraisal

Investment D

Listed 235k, lowered to 225k

My loan officer advised me to cash out refinance my current house A to purchase quad-flex D. Since I have around 140k equity, that should be enough to cover my down payment and others can be used my future property purchase.

My initial intention was to purchase D using refi money from B and C. However, I think I need to focus on repairing those two before submitting another loan application. Partially roof repairing is done. I need to do more flooring and other little minor work.

At this time, my local lender advised me to refi current house A to cash out 75% with 3.2% 15 year loan. That would cover to pay my current loan (3% 15 year, 5.5% HELOC, and etc.). Before proceeding, I want to confirm with you guys if my thinking strategy sounds ok.

Any advice on this matter is greatly appreciated!!

Thanks,

G

Sounds like you should just use the HELOC for the down payment and repairs and call it a day. I certainly wouldn't put a 15 year on it even if the interest rate is lower. Pay the higher interest to have a lower payment in case you need it someday and pay it like a 15 year to pay down the balance.

The larger concern is your perception of values.  It appears you're not being realistic with the values (hopefully you're not relying just on Zillow).  To put it another way, you are thinking your properties are worth more than they really are because you're using emotion (you love the houses and the work you're doing) to steer you rather than numbers.