All Forum Posts by: Chris Mason

Thanks to those who provided data/analysis that compares to the 2019 baseline. Useful context. :)

With the equity gains of the last few years, it would in most cases be pretty stupid to get foreclosed on... just sell for a profit. You can still sell a house like normal when you're 2 or 7 months behind on the mortgage, assuming that doesn't put you underwater. 

Also, a request. We know foreclosures were really low in 2020 and 2021, because they were more or less illegal to initiate. So saying things are up 5000000% from 2020/2021 isn't useful. I'd request that all comparisons include baseline pre-covid 2019 (or before) numbers. For basically everything we are measuring right now (not even just real estate related), we need to know how it compares to the 2019 baseline, because without that we cannot tell a "return to the baseline" from other patterns (& I suspect most things that are up/down eight zillion percent YoY are just returning to the 2019 baseline -- which is a good thing). 

 Preapproval v prequalified is a difference in convention/tradition, not in law/regulation/etc, FYI.

Realtors traditionally like the word "preapproved" better, but that has less and less meaning over time as internet lenders increasingly ignore the convention, and define stated income / stated asset (for a loan that will be anything but) as "preapproval." 

What pragmatically matters is what happens when you put the offer in. The listing agent is going to google search your specific loan officer, ideally by person name (rather than company name). Simulate that, do that yourself, and see if a bunch of good reviews will pop up, or poor reviews, etc.

 Yes, and as stated only the actual minimum required payment will be counted.

When a particular bank has requirements more restrictive than baseline, it's called an "overlay." Those are tough to navigate, because they are never published publicly, and are often the reason someone switching lenders after preapproval, to a new lender, ultimately has that loan application denied at the new lender. So when your realtor advises against switching lenders at the 11th hour, it's not nefarious (conspiracy theories abound, but are in error), they're trying to prevent you from losing the house/deal.

Overlays primer: 

https://www.experian.com/blogs... 

Fortunately a colleague posted the 2-4 unit values. For high balance, 1.5x all the below figures.

I honestly don't know if anyone would be able to hit the APOR requirements after the condo and investment property hit were both factored in. Hopefully you're putting 25% down to make the condo hit go away.

Get a referral from the listing agent. If she wants a commission check, she should have one. 

 Man, check out that crystal ball prediction about lenders laying off vast numbers of their staff from 4 months ago, unfortunately it was on the money. :)

In a bull market, everyone is a genius. 

It's not 2016 any more...

Assuming you are buying cashflow positive real estate, DTI should get better with each acquisition. Sometimes it doesn't "look" cashflow positive on tax returns, that's probably the most common thing jamming people up. Top two culprits for that are:

a) advanced business entity tax strategies. Cool, you made yourself look broke, the Agency mortgage underwriter sees that too. Whoops. Solution here is DSCR loans, that comes with higher rates and fees. Hopefully the tax savings make up for it, but it's a package deal.

b) Things on Schedule E of your personal tax returns that I will politely call "errors." Schedule E is where your rental property income is reported, if you don't have any fancy business entity tax strategies going on. Two tips:

1) If your CPA gives you a choice between writing off an expense as a "repair" or as "depreciation," depreciate it (if you want Agency 30YF good mortgages, that is). The underwriter will "add back" that write-off to your income, so it'll save you tax money without hurting your DTI.

2) Fair rental days. CPA software defaults/auto-populates to 365, and your CPA left that default value in for whatever reason. But you purchased the property in June. So the underwriter may divide your 6 months of income by 12, and effectively cut your calculated rents in half (b/c you told the IRS you had it rented the entire year). If you only owned the property half the year, then fair rental days should be more along the lines of 30 * 6 = 180 days. 

The other reasons people have DTI issues either aren't real estate investor specific (such as quitting your W2 job for a 1099 gig), or are examples of "the system working as intended" (such as buying a bunch of poorly cashflowing properties).

Rocket Mortgage, largest mortgage bank in the country, went live with the anticipated/guessed 2023 loan limits yesterday. The largest wholesale lender used by independent mortgage brokers rolled it out today (you can't roll something out like this in 24h, and they hate each other so didn't collaborate, I'm chalking it up to coincidence and/or both waiting for the same data-point to make the calculation/guess).

They both guessed/calculated the same number. $715k for conforming conventional, which yields $1.072m for high balance areas (that's your San Francisco, NYC, Oakland, San Jose, Los Angeles, etc). For medium areas, like Sacramento, it'll be a number in the middle. 

This makes $750k with 5% down, meh credit, and no reserves, totally doable if your income otherwise supports it, in most of the country.

In the high cost of living areas, it puts $1.125m on the table for same. 

I took a screenshot of the 2-4 unit loan limits (from a live webinar a few minutes ago), and then promptly lost the screenshot. heh.

Availability, again, for now there's basically 2 choices:

- Largest mortgage bank in the country, Rocket/Quicken (same company).

- Local independent mortgage broker (who will broker it to the 2nd largest mortgage bank in the country, UWM). These are priced identical to 'normal' high balance loans, no rate/fee hit aside form that.

The "official" announcement of the 2023 loan limits will come around thanksgiving, and it will "officially" be in place/available on Jan 1, 2023. What these large well capitalized lenders are doing (this takes deep pockets), is they will hold these loans on their books until Jan 1, 2023, and sell them at that point. As we get closer to Jan 1, the pockets will not need to be as deep, so more and more will roll it out.