All Forum Posts by: Akash Sky

@Akash Sky Great question, and the answer is a bit surprising. Regardless of whether you put more down on FHA, you will still have mortgage insurance. If you put more than 10% down, your minimum term of having mortgage insurance on the loan is 11 years. Meaning you cannot get rid of the mortgage insurance for 11 years. Even if you put 20% down, you still have mortgage insurance for a minimum of 11 years. So, why would someone get an FHA loan if they have this much to put down? They might have a lower FICO score than needed to qualify for conventional, or had a more recent short sale or foreclosure (FHA has a shorter waiting period), or have some other situation that conventional loans would not allow.

With Home Possible, yes,  you would avoid the mortgage insurance by putting 20% down.  If you do have that much of a down payment, you wouldn't necessarily need that program.

As for which is best, it all depends on your credit history, savings, etc.  1.5% might not seem like that much of a different but when you get into the higher purchase prices, $600,000 or so, 1.5% is $9000.00.   

@Akash Sky Yes, FHA loans generally have lower interest rates but if you put the minimum down of 3.5%, you'll also have mortgage insurance on top of that for the life of the loan, so it's a good idea to compare each type of loan based on your credit. FHA is great if you have less than perfect credit, higher debt to income ratios, and need a very low down payment.

There is a program through Freddie Mac called Home Possible that will allow 5% down on 2-4 units with a conventional loan.  There are income restrictions unless you're in certain areas, but this is another great option for low down payment financing for either first time buyers or anyone that doesn't own any other property.  Conventional loans require better credit history, and will also have mortgage insurance with less than 20% down.

@Akash Sky  Do you own your own home yet?  Or will a multifamily that you'll also live in be your first investment?  Honestly if you're just getting started I would focus on qualifying for that first loan.  I'd be happy to go over your options with you, based on your specific situation.  

Portfolio lenders are generally good when you can't qualify for conventional or FHA for one reason or another. The rates are generally a bit higher and down payment requirements are the same or higher. Most people want the best possible loan they can get. Just because you do one loan with a lender does not guarantee they will lend to you in the future if you don't meet their guidelines.

 Hi Akash,

There are numerous options for portfolio programs but the main requirement is equity, or large down payment, not a relationship with the lender.  Yes maybe after you've done a few loans with them they can be more favorable toward your deals but they will generally still need to meet guidelines.

What is it specifically that you need a portfolio lender for that can't be done conventionally?  That would help determine whether a program is available for what you want.

For example are you self employed and write off too much income?  Do you want to borrow strictly based on the income of the property?

Akash Sky not a great deal by the rest of the countries standards at less than 10% cash on cash return. Most people want to see at least 15-20%, but I know that's harder in Cali. Also I'd double check all the numbers on that property. Unless I'm missing something, the cap rate is blatantly wrong which would make me think there's more errors(embellishments). Cap rate is NOI/purchase price. 43200/605000= 7.14% cap. Cap rates are by area though you'd need to be asking how good the deal is in your area. I wouldn't go for that deal on the east coast if that's worth anything.

Akash Sky I share Zak Parks 's concern. In addition the NOI/gross seems to high. Rule of thumb is around 0.5. I would suspect hidden expenses, particularly as the house is quite old.

Hi @Akash Sky,

If brokering or direct lending was always better, the other would have been put out of business decades ago. I do both. And I correspondent lend, just to throw a 3rd term into the mix. It's really scenario dependent. Don't get caught up in the buzz words and sales pitches. 

Direct lenders lend their own money, their name will show on the note and deed of trust.  Mortgage Brokers lend other peoples money, that other person/company will show on the note and deed of trust.

I wouldn't assume a mortgage broker is more expensive.  You pay the commission either way, in the case of a Direct Lender it goes to the Direct Lender, in the case of a Mortgage Broker it goes to the Mortgage Broker.

If you are dealing with a broker, in addition to there being a disclosure to that effect, you will generally be offered loans from more than one source.