Growing impatient (bank or hard money) ???

Question

Hello fellow investors/house hackers,

I feel stuck and it's getting frustrating.  I've been working on getting my credit better (which is around 730 now) and saving up for my next house hack.  I've been following the advice of the agent and lender to get pre-qualified for about 2 years. I've been told that I have to have 2 years of rental income from my current house hack which I will have my first year under my belt when I file my taxes this year.  My question is should I use private/hard money or be patient and continue working with my lender ? The numbers would obviously be better with a bank, but I plan to refinance regardless in order to continue to house hack / BRRRR.  Suggestions are appreciated.

T.I.A,

Taylor Dasch · Answer

Great job on a great credit score! In my opinion, it really depends on the property - if you are going to be living in it, and it is livable already I would go with the bank, unless it needs over 20k in work the numbers are going to work better if you stick with a bank and use your own funds. I would put the 3-5% down, fix it up while living in it and then continue, often times when you are refinancing they will only refinance you at a 75-80% LTV ( I am not a lender so could be wrong) but that would make the numbers better either way if you just did the house hacking/nomad method.

Bo Smith · Answer

Yeah that 2-year thing is so annoying, honestly feel you on that. Quick hack though - some lenders will actually use your lease + market rents instead of waiting for tax returns if you can prove 75% occupancy. Also local/community banks don't care about those big bank rules as much. Have you hit up any smaller banks in your area yet?

Aaron Zimmerman · Answer

Id connect with@Clayton Silva to see what he can do. I talked him with recently and was impressed with the programs they had available to investors.

Erwin McClain · Answer

Thanks @Aaron Zimmerman

Erwin McClain · Answer

Hey Erik, I believe I do need the rental income to qualify.  However, I've had bad experiences in the past dealing with partners.

Erik Estrada · Answer

Hey Erwin

Do you need the income from your rental units to qualify? What if you add a co-borrower?

Ben Fernandez · Answer

Stick with your long-term lender.

However, try the HomeStyle (conventional) or 203k (FHA) packages if you're adding value/BRRRR'ing.

If you use a private lender and only pay 10% down or less, you'll need to achieve a 20%+ equitable position before you could refinance. Meaning you'll be stuck paying much higher interest, and for longer, than necessary. Of course, this only applies in the scenario where you aren't adding value. (Or if the value being added isn't enough value to reach an eligible LTV).

Also, when you factor in the higher interest rate paid each month, the points due at purchase, refinance charges, and likely a higher down payment than 3-3.5%, it'll only eat away at your seed money for the next deal.

...And I hope you're not going to put 20% down with a private lender just to avoid this when you could be putting 3/3.5% down instead...that would be a waste of cash.

Greg Kasmer · Answer

@Erwin McClain - I would encourage you to speak to 5-10 regional banks and credit unions. I've worked mostly with them on lending products and have been happy with their flexibility. I think you'll be surprised how they can work with you compared to larger banks. Good Luck!

Erwin McClain · Answer

Thanks Greg

Erwin McClain · Answer

Thanks Bo, I'm currently reaching out to my local credit unions shopping around.

Growing impatient (bank or hard money) ???

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