All Forum Posts by: Andrew Postell

Got ya @Tiffany S. Based on what you just typed you've done the hardest part already - finding a home. So congratulations! That's so hard for a lot of us right now. A Hard Money Lender would lend you $100,100 for the purchase and the "rehab" work. And that figure is what most investors would use to buy this home. What I mean is that if you bought for $63k and it comp'd out at $143,000 then your cosmetic work should not be over $35k. Part of that reason is that $100,100 represents 70% of the "After Repair Value" (or ARV). A conventional loan can refinance 75% of the ARV. That way you could refinance out of the hard money, with the closing costs of the conventional loan, without bringing any money to the refinance closing. If you want to buy this home with a conventional loan and use your Lines of Credit (LOC) to do the other work then go ahead. No issue with that at all. Some investors do like using other people's money though. Meaning, if you found another amazing deal the next day, and your LOC are maxed, how would you buy that property? Just something to think about. Again, congratulations on finding a home. It sounds like a great deal!

Ramon, if you are receiving a loan the system that a Loan Officer uses should tell you how much in reserves you should have for lending purposes.  It's usually 2-6 months of all of the mortgage payments you have.  Your credit history and the amount of homes you own will determine whether you need 2 or 3 or 6 months of reserves.  From a pratical position having 6 months is ideal no matter what a "system" tells you.  Also, if you are using conventional money and need more reserves you do have the option of using 20% down or 15% if you need to.  20% is better but 15% is an option out there.  Not every lender offers 20% down and 15% down so look around if you need to find those options.  Good luck!

Tiffany, what you are describing is a very common area of confusion to most investors. To answer all of your points would require an essay. The short answer is yes, you can buy a home with a conventional loan with 15% down. And there is also a rehab conventional loan. And if you buy a home with cash, there's no seasoning requirement. Those are the short answers. But the reality is that buying a home in disrepair usually means you need to get a good deal on the property to buy it - I mean a REALLY good deal. Which means you need a very motivated seller (or desperate). And the more "motivated" that seller is the quicker your closing needs to be. To do a conventional rehab loan means a closing time of 45-60 days. It's an annoying process and that long of a closing process means your seller might back out. I don't like the conventional rehab loan product and most people don't like using it. Hard money means that you can close quickly. So if the numbers are REALLY attractive (which they should be), who cares if the hard money lender charges you a little more. If a few extra $$$ breaks your deal then you probably shouldn't be doing it. On the other hand if you find a home that needs NO rehab and it's a good price - then buy it with conventional money outright. You can use as little as 15% down. But remember that with 15% down you would pay PMI with that mortgage. So most of my investor clients use 20% down. That way they maximize their cash flow and leverage their money as best they can. Now the skinny to this is that different lenders might have different rules. So one lender may only allow 20% down while another lender may only allow 25%. The real scoop here is that a lender can choose to be more strict if they want to be....but not less strict. In the lending world we call these overlays - rules that are OVER the Fannie Mae/Freddie Mac rules (or conventional). So try to find a lender that has no overlays and knows how to lend to investors. It might be harder than you think to find that type of a lender but we are out there!