All Forum Posts by: Chris Mason

I'd give both groups a 2nd pass, looking at DTI instead of HTI ("3x" = 33% HTI). For DTI, just add in the car, student loan, etc, payments, and divide by income.

And I'd give the credit people a 2nd pass too, looking at the story it tells. A medical collection account from 4 years ago is VERY different than a car repo from 2 years ago, for multiple reasons, not the least of which is that they probably didn't plan to get sick, but they DID plan to buy that car ahead of time that they couldn't afford. I'm in an industry that obsesses over the numerical FICO score rather than the 'story,' I'd love to have those handcuffs off and be able to focus on that instead. 

Devil is in the details. 

 Yup, you can use projected rental income from the property you are buying. Just make sure you're working with someone local for the mortgage who knows what they are doing, not one of the covid refi churners.

As mentioned, if you get sick if it and just want a solution, call your go-to LO and just have them order an appraisal for a phantom refi through the 'normal' channels.

 Once in a blue moon I've heard a past client say this, who is sick of calling around, and I'll just place the order through our normal channels as basically a "phantom refi" appraisal and a favor, but the person obviously winds up paying for and getting a full/traditional/standard appraisal, not a 'virtual' one. From the perspective of the appraiser, this is just another one on the assembly line, not a one-off, so it gets done just like the rest. Not a one-off type thing.

Appraisers have just had the best 2 years of their entire careers. If they get any whiff of someone trying to save money on an appraisal fee as a one-off, no surprise that they'd ghost ya. In general this isn't the labor market for cheapos, that's doubly so if the 'labor' in question is one that's BOOMING due to the pandemic. Visiting the property in person isn't the most time consuming part of an appraisal, so expecting some massive discount is off-base. And, naturally, the cheapos don't have a pattern of being the easiest to work with (they never do, in anything, full stop, no exceptions), the pattern is that they are more difficult, not less. 

Instead, if you want to order it with an appraiser directly as a one-off, pitch it simply as them saving on the "appraisal management company" middle man fee (they hate AMCs in general [so do lenders, in case you're wondering], so you're scratching that itch). If you pay $600 for an appraisal ordered through a lender, the appraiser only gets about $400 or $450 of that b/c of the stupid AMC taking their cut. Offer them $500, and you will send them a bunch of pictures of the property to save them the drive, something like that is probably the sweet spot. And guarantee them they won't have to interact with a mortgage underwriter or a realtor or a loan officer (people they regard as annoyances) to boot. So you pay less, they net more, and it's slightly less work. Now, we're realistically checking boxes for a one-off.

If you need to ask, it's probably not worth the hassle. 

There are 100% REI who get their real estate agent license, and benefit from it. A common characteristic is that they don't need to ask the question, since the answer is obvious to them.

Honestly, if you're that far into the weeds, it's probably time to get off of Web MD and go talk to a real doctor. Good chance the issue isn't actually the back ache you've been focused on, it's something else you aren't thinking of and may not  have known about, maybe even with a super quick and easy fix not even on your radar, because you're down the wrong rabbit hole.

If you want to build a 2-4 unit empire, focus instead on how you're going to get 20% to 25% down over and over again. Those are the people with multifam empires in desirable real estate markets in the real world. Very consistently. 

It's not going to pan out if you're trying to do multi->multi->multi, but it's realistic, and can pan out that way, if it's SFR->SFR->SFR.

I know someone on house #7 in Oakland that would put just 5% down for the first 4. Around house #5, #1 had enough equity to do a cash out refi, so lately she's been putting more down to improve cashflow. For #6, #2 had enough equity for a cash out refi, and so on. She legit moves in and lives there for 12 months each time, and yes we have ways to check for that.

Income goes on the income column, PITI/expense goes on the debt column.

Same house, same data, calculated differently. Let's suppose that $50 positive came from $3000 rent (after applying the 75% thing) and $2950 expenses. Ah, but it's owner occupied, you obviously can't collect rent from the unit of the duplex that you're living in. So now it's $1500 in rental income, $2950 expenses. But we're not done. You're also putting down 3.5% on an FHA loan, so the PITI isn't $2950, it's $3600.

Starting:

$4000 / $10000 = 40%.

Let's suppose that $2000 of that $4k was their personal rent. Cars, personal debt, student loans, etc, are the other $2k/mo. They're buying a primary residence, so the rent they are presently paying goes away, but the cars and student loans aren't going away.

$2000 / $10000 = 20%

We need to add in the $1500 in rental income, and the $3600 of expenses. 

($2000 + $3600) / ($10,000 + $1500) = $5600 / $11,500 = 48%.

Same exact house, 25% down investment property v 3.5% down owner occ. 

 It's actually even crazier than that in the HCOL cities in California... Bay Area, Orange County, Los Angeles: