All Forum Posts by: David Hooper

Where's the property located? As indicated above, there's a resource for hard money lenders throughout the country within BiggerPockets, and there are probably folks on there who deliver on their promises a lot better than the bait-n-switch your current lender pulled on you. 

@Josiah Collins -- shouldn't be something that should get you turned down, but as @Kent Nielson indicated above, it's hard to say without seeing your tax returns, etc. 

Ideally the commercial loan and the associated business expenses / profit & loss statements should reside separately in your taxes. Given what you've written, it's a make-sense deal that any lender should be happy to take on for you. 

@Skye Penland: Yes. I didn't end up doing it but I have the same situation and was considering it... tried to go through NFCU and it was a pain so I just decided to put 20% down on my new/current primary residence. Currently still have 2 VA loans out with rentals out in CA.

There's definitely a normal procedure for conducting a verification of employment (VOE) -- it's a standard form, which you can see here: https://www.fanniemae.com/content/guide_form/1005.pdf. 

Unusual that your lender would be asking for verification of something that's *untrue*... The intent behind that is to verify that you're getting paid, you're not on any type of probation, and you're not likely to get fired/demoted. All tied to the concept of "Ability to Repay" as laid out by the CFPB: https://www.consumerfinance.gov/ask-cfpb/what-is-the-ability-to-repay-rule-why-is-it-important-to-me-en-1787/. 

@Account Closed, as previously stated, I think the rehab / refinance strategy is the most likely way to essentially get 100% financing. You can do a Fannie Mae HomeStyle loan, buy a place for 85% LTV -- combined purchase and rehab costs. Find the right place and do the right rehab, and you'll create equity as soon as the project is complete. Assuming you're able to create enough equity, you can cash-out and get your initial 85% back.

Example: 
Buy a fixer-upper for $200K
Rehab costs: $50K
ARV: $325K

New cash-out loan: $260K

Hard to find those properties, but I've heard of it happening as I've increased my exposure to the HomeStyle program. 

My thought reading your question is that it probably would've been better to refinance to a conventional loan while you were still living in the home, as conventional refinance rates on investment properties are a lot worse than for primary residences, so much so that you may not actually improve your cash flow even taking out the FHA mortgage insurance.

You do need the FHA loan to get a low down payment on a 2-4 unit property though. You may end up needing to "buy the rate down" with some capital/equity on the refi into a conventional loan. If you have enough capital to do 20-25% down, you may just be able to purchase the 4-unit with a conventional and not worry about messing with the existing FHA loan. 

Thanks for sharing. Looking forward to it. :) 

@Casey Powers I’ve run across several agents who wouldn’t qualify for a mortgage. Of course I haven’t “made it” yet as a lender and I don’t have top producers calling me for a loan, but I’ve seen some with significant credit and debt challenges. Then you think of tax reporting and accounting,... as an agent you deduct EVERYTHING to pay less taxes,... means you can’t get a loan.

HomeReady is 85% LTV on a 2-unit and 75% LTV on a 3-4 unit.

https://www.fanniemae.com/content/faq/homeready-fa...

@Jheanell R., Even though you get hit on the rate if you refi your current FHA loan, that might be the "cost of doing business" in this case of pursuing additional multi-unit properties. The good news is, if there has been any appreciation and you're just doing a rate/term refi, you could drop PMI. Even if not, PMI will eventually fall off on the new loan.

Your mortgage broker/lender is probably well-intentioned, but is focused on the best loan "objectively," vs, in the context of your broader real estate investing goals. 

Hey @Jimmy Smith,

The best renovation/rehab loan product on the "conventional" / "government" market right now is FNMA's HomeStyle program, which will let you borrow up to 97% (ARV or total cost) up to the conforming limit ($484,350 in most places for 2019). You have to get your bids and budget in place, order a specs and plans appraisal, then you close on the loan to purchase. You get an "escrow" account from which you draw on your construction/rehab costs.

In terms of the VA's rehab/renovation loan... it's an idea the VA has been working on, but despite the mortgage industry's work with them to get the program up and running, it's still a bit of a mess. It would look a lot like the FHA 203K, since that's what it's modeled on, and my company and our investors are "in the trenches" of trying to get this product to market effectively.

A good option for you might be to proceed with a relatively "normal" rehab/renovation loan at the 97% LTV and once you've been on title for 6 months, look at refinancing with a VA loan (100% cash out refi possible). Of course, you suffer on the interest rate on a cash out refi vs. a purchase loan.

I've attached a pic with some details on the HomeStyle loan. Hit me up if you have additional questions. 

@Jimmy Smith