All Forum Posts by: Daniel Hennek

You are the only person who can truly answer this question.  You are the only one that knows your abilities and future plans with the property.  Therefore the only one that can ascertain how those loan options play into those plans.  The way it should work is that you have a detailed conversation with the loan officer who offered you these options and they help you explore why one might be better than the other based on different scenarios.  Sounds like that didn't happen? 

I suggest talking to the person who offered you these options in depth about this.  They are vested in discussing this with you and should take the time to help you vet the options.  Nobody here has enough context to give you any worthwhile advice.

Previous experience is a big factor, but life always happens.  The reason people say don't pay a contractor up front is because when life happens to them you don't want it to happen to you as well.  Even someone who's done work for you in the past can have problems and end up leaving you holding the bag.  Trust but verify is a good concept to think about.  You need to always hold people accountable.  Think of the concept of security for a debt.  What is your security that this person will perform?  If they don't want to be held accountable in a fair way then that is a red flag.  The guy trying to press the ego button with a comment like "it's only $7500, not a big deal" is also a red flag.  Was he like this for past projects?  If not then why the change?  If so then why are you posting here?  

Secondly, I've never paid a contractor anything up front.  Most recently we built a $250,000 shop.  We were $70,000 deep before we even wrote the first check; one of the checks we wrote AFTER the work was done was $105,000.  Experienced contractors have credit with suppliers and don't have to pay for many things right away.  Someone who can't carry $7500 with a supplier is missing something, or they don't want to do it for you.  Whatever is going on it doesn't all add up.

USDA does not allow you to refinance from any other type of loan to a USDA loan so you are unable to get a USDA loan.

You are trying too hard to understand this all and you're missing a lot of things. You should just call someone and talk it out. You might qualify for a credit qualifying FHA streamline that could remove her from the loan. If your credit is 600 or better and your debt to income is good you shouldn't have a problem getting a streamline.

Call someone and talk to an MLO. 

Definitely ineligible for conventional financing. If you do buy the property you should look into separating the parcels. It will increase value significantly since it will increase marketability if they're eligible for conventional financing. Any property that is ineligible for conventional financing and is competing with other SFR's that can be purchased with conventional financing is less marketable and therefore less valuable.

I've got lots of buyers out there looking.  I'm talking about conventional mortgage rates first because they are the lowest and people are looking for their best option.  We're always trying to get someone into a conventional mortgage first and everything else is backup.  Say someone calls me with a property that is ineligible for whatever reason and I tell them their rate is going to be higher by 1-2 points or more.  90% of people immediately disregard that property when they hear that.  The other 10% stop and do the math for a minute thinking about all of the angles; most of them forget about the property shortly after and get back to looking.  A very small percentage of buyers see the opportunity and want to do the work.

If you can buy with a Non-QM(DSCR is Non-QM), separate the parcels and make them eligible for conventional financing you'll have a lot more buyers in the market and therefore more value with the two separate properties than the one combined. These opportunities can be lucrative for the right buyer if they know what to do once they get the properties.

It's not a duplex. A duplex is single dwelling with 2 units in the same structure. 2 single family residences would either be a 2 unit ineligible property type or it would be looked at as a single family residence with ADU, Accessory Dwelling Unit.

To determine if it's 2 units, or a SFR with ADU they'll look at utilities, parcel numbers, etc. If you have separate utilities and difference addresses for each place then it would be ineligible. If you have the same utilities, same address, etc...then it would just be a SFR with ADU and could qualify for conventional financing.

I assume you are paying your rent from a bank account.  If so just document your rent payments for the past 12 months and you'll be able to qualify at your $1200 per month.  Guidelines do not require the verification of rent payments through a lease; some people don't have written lease agreements.  You should not have to use the $3400.  An underwriter might ask for some supporting evidence of your $1200 payment and you should be able to provide that in the form of proof of payment.

It sounds like you should talk about a conventional mortgage with someone else. You shouldn't have to get a DSCR loan and pay a higher rate because people don't know guidelines...

Another option would be to move into the place you're purchasing...

Reverse mortgage?

Not knowing the details of your parents situation it's hard to tell what might constitute good advice.  You can certainly look at co-mortgaging with them on a cash out refinance but I'd look long and hard at the math and what you're hoping to accomplish.  If you "know very little about this" then I'm not sure what kind of expertise you have to be "assisting them to invest".  Do you have a securities license?  Are you a financial planner? Do you have any credentials to be offering financial advice?  

I'd be real careful about any moves you're making and do the math to see what you could be gaining and what you are risking.  If they just need a little more cash flow to live easier in retirement then a reverse mortgage can be a great option.  

If you're trying to "increase their passive income" thinking that will give them the added cash flow now, and one day you can take advantage of that passive income I'd think long and hard about what they'd be sacrificing in order to achieve that end and the differences in their possible lifestyle in one situation vs the other.  

Again, not know your details makes it hard to give good advice and I understand that I don't have all the facts.  Just speaking to some red flags raised in your post...

They can lose more than the loan amount in a foreclosure event.  

Not sure why you'd have documents indicating you can't sell other assets unless they are being used as collateral for the loan.  Maybe read those parts again slower.

Getting the lenders consent to take your money seems a bit odd.  I don't have a ton of experience with commercial loans but that's one I've never heard of.  The index and margin changing is pretty common though.

To be blunt and straight with you it sounds like you should have done a whole lot more reading of these documents weeks ago.  I'm sure this was all presented to you at some point early in the process...You could have simply read your documents and spoken to your loan officer in depth about it all.  Next time be sure to have those conversations early on.

Of course you can cash out and pay off a VA mortgage with a conventional. If you want cash out you can certainly get a conventional mortgage provided you meet all other requirements. IRRRL is not cash out, but CAN be used to reduce your rate on a property you no longer occupy if the current loan is a VA loan. If you can't get cash out you should probably still do an IRRRL if you're keeping the property, and should have done one about 20 months ago based on the rate you quoted.

A HELOC might cost you more than refinancing to a lower rate with the addition of cash out. Do the math on the rates and how much interest you'll pay. Most people opt for a cash out and keep it all in one loan because they don't like the variable nature of a HELOC.

1: It should never be unclear why a lender is denying your application.  They have a legal obligation to inform borrowers of their credit decisions with a legitimate reason.  If you're working with someone incompetent who can't tell you that reason then you need to push harder to get one.

2: Appraisals are always non-refundable. The lender isn't going to pay the appraiser, and the appraiser isn't going to take $0 for all that work just because you and the loan officer didn't do your due diligence. You can't transfer appraisals simply because of guidelines. It gets tricky and some lenders allow appraisal transfers, but most competent appraisers won't just transfer the appraisal. It's technically a new assignment even if it's the same appraiser because the client is different, the client is the lender not you. Appraisals are good for 120 days on conventional and FHA. 150 days for USDA, and 180 days for VA...not 60 days so that's just an excuse that doesn't really matter and probably given because they don't want to get into it with you about why the appraisal can't be transferred. A lender can approve whatever appraisers they want, it's a simple process so saying "they aren't approved" is just another way to avoid the conversation with you and get you to move onto the things you should actually be focusing on. One of those being that you'll have to get a new appraisal to work with a new lender.

3: The reduce the risk of have some lender deny your application...work with a better lender and better loan officer.  It's a simple process to get a lot of certainty before you move forward and at that point only a very small amount of rare scenarios can prevent or delay closing because something needs to be done, and in those cases the reason will be obvious to you.  This is why you need to dig into why the lender is denying your application.  Get a reason and don't settle for some incomplete explanation.  They ultimately have to send you a denial letter so you can also look on there.

4: Applying to 3-4 lenders is just a crap move.  You can inquire with those lenders, and technically yes you can apply but it's kind of a jerk move and a huge waste of time.  This is why I suggest finding a really good loan officer first so nobody is wasting time or money.  A really good loan officer won't waste their time because it's very valuable and they'll be straight with you upfront.

5: I'll never pay for a client's appraisal.  Most lenders will never pay for a clients appraisal.  That's not a realistic thing to look for

You just need to find a really good loan officer that knows there business.  It sucks that you wasted $1300 with an incompetent loan officer, but that's your main problem.  Find a better point person.  Ask tough questions, do your research and educate yourself.