I am a newbie investor trying to close my first deal and get my business off the ground and started. I have been reading BiggerPockets and listening to podcasts for about a year gaining knowledge before jumping in. I am in Tampa and located a house in a desirable neighborhood and got it under contract. The house is a 2/1.5, 1127 sq.ft. Comparable houses in the neighborhood that are 2/2 are selling for approximately $290/sq.ft. I was referred by a friend to a mortgage lender who informed me she could handle the deal and also that her company handled in house home-style renovation loans to make sure I had enough funds to convert the half-bath into a full bath. I went this route to maximize the deal. Two weeks after the contract was signed, she informed me that her company no longer does the home-style renovations in-house and they would employ a broker to handle the deal. Needless to say things have not gone smoothly. It has been 11 weeks and I still do not have a closing date. I am ready to discharge them and fine someone new, but I have paid out of pocket expenses for inspection, appraisal, insurance and a HUD consultant that I am worried I cannot recoup or these will not be accepted by a new lender. Does anyone know if a new lender would accept these? And should I find a new lender to close the deal? I appreciate the assistance.
what's the LTV on the deal?
(Purchase price + repair budget) / ARV
The LTV is 85%.
that will be the rub very few rehab loans will go 85% LTV.
unfortunately the industry is full of mortgage brokers these days that just can't get it done and promise the moon and don't deliver.
I would be talking with your personal banker and see if they can help you.. hopefully you bank at a small local community bank and have a close relationship with a banker there.. I find this to be the very best rates.
If this is a flip, I'd pull the plug. If you're at 85% of ARV with just purchase and Reno, your holding and sales costs are going to be 10%, leaving you with maybe 5% profit....too thin. Also, does your lender know you're doing a flip, as homestyle loans are intended for buy and hold. As for a new lender, they have to order their own appraisal, and I didn't realize you had a HUD counselor on a Fannie loan.
@Sheldon McMullen, Hello, at that point I would scream..."STOP!" What are you trying to do? Then, I need to know where the heck did you find a 2/1.5 house that is supposed to be worth $2.90/sq.ft. when you can build new for half that price? A tear down house on Davis Island can be $750 if you want to spend that kind of money to build new. Call Tony Torres at Olympia Mortgage Services on 7301 N. Armenia and really think about Buying anything at this time in the Market.
The rehab cost includes adding a second bathroom so it will no longer be a 2/1.5, but now a 2/2, and comparable in the neighborhood makes this work. The lot is not huge, so building would limit the size and this property is not Davis Island, so after running the numbers and consulting with a few builders, we can get more out of the flip and also do so in less time. My lender knows this is a flip and I learned that Fannie Mae requires a HUD counselor on these types of loans.
@Wayne Brooks does Homestyle loan = construction to perm.. for owner occ?
It will not be owner occupied. And for construction that would also require architectural plans which is outside my plans for the property.
I don't think you can do a home style loan for an investment property. I'm pretty sure it can only be for owner occupied properties. So you will never get the property to close, unless you plan on committing mortgage fraud.
@Jay Hinrichs Homestyle is combo purchase and Reno...similar to 203k, but also available to investor for a SFR.
Correct it is available for single unit investor properties. Very similar to 203k, the only difference is the amount. Under 203k you are capped at $35,000, while under homestlye you can go up to $100,000.
@Wayne Brooks thanks never heard of that before.... I think in our market inventory is so stinkin tight that you have to pay cash or use HML who can close in 2 to 3 weeks.. if its a deal in this market sellers simply will not wait for bank loans generally speaking
@Sheldon McMullen Not exactly. 203k Streamline, easier process, no consultant required, etc. is capped at $35k. Straight 203k can easily go over $100k.
All this for a crummy high risk 'job' at a high tax rate if you make any money?
Only to have to do it all over again if you want to earn money again?
Do it for the education, then change niches @Sheldon McMullen !
Join the Largest Real Estate Investing Community
Basic membership is free, forever.