All Forum Posts by: Elise Marquette

I've seen clients take cash out of their personal homes to purchase an investment property cash- honestly it's probably the smartest way to do it. You get the interest rate of a primary residence (credit depending, it can be in the 2s nowadays), you don't have the LTV restrictions that you would if you were financing an investment property, and you can start cash flowing immediately and not have to worry about passing any sort of inspection. However, I will say that if you plan on taking cash out as the down payment for your investment property and financing it, then you may run into some underwriting issues down the road. They don't want you to be over-leveraged when it comes to your debt to income ratio (the ratio of your gross monthly income to your total monthly debt obligations, such as credit cards, cars, student loans, etc.).

@Max Creasy qualifying purposes and I’m only talking about residential mortgages, it may be smarter to buy an investment property first and begin cash flowing with that. If you buy a primary residence first then you will go to buy an investment property (assuming you’re financing investment property) you have to worry about your debt to income ratio being too close. Of course, I don’t know how much you make or how much you plan on financing for your primary or your investment property but lenders will look at your gross monthly income in relation to your total monthly obligations, including credit card, student loans, and housing payments. Your monthly obligations can not exceed a certain percentage that varies from loan to loan. If you buy a primary then go to finance an investment, you’ll have to show that you can support two mortgage payments whereas if you buy an investment, you can use the income to qualify for a primary down the line on top of income from your job

@Kyle Shepherd Speaking only for residential mortgages, I don't know anything about commercial, you would have to go with a conventional loan (instead of FHA, VA, USDA) if you do not plan on living in the property since it is the only program that allows non-owner occupied. Conventional loans can be stricter about where the down payment comes from. In your case, it sounds like it would technically be considered a "gift." Typically the gift must come from a blood relative

I should add that residential real estate is a home that meets basic minimum property requirements and is between 1 to 4 units. So anywhere from a single-family home to a quadruplex

@Kyle Shepherd You can do a 30 year fixed mortgage on an investment property, but there are certain types of eligible property. The issue with trailers and mobile home parks is that they generally are not deeded as real estate. They are usually deeded as property rather than real estate. Mortgages are strictly for real estate

Have the lenders said that they are refusing to do cash out refis? I know a lot of the big banks have a 45 day turn time for a refi. Typically, I see refis done in 30 days. Cash out refis can take longer than a non cash out since the bank is essentially taking on more risk. Many banks increased their credit score and debt to income ratio requirements with the uncertainty in the market. I hope that if unemployment continues to go down that banks will start to reopen their programs. I actually left my previous company where I worked in lending because they were tightening restrictions too much to get any loans through and went to a new company that didn't have the same restrictions and was big enough to take on more risk. 

Yes, since you went to school for it, that will count as two years in the industry. FHA mortgages tend to be more lenient on the employment requirements. I'm assuming you're working full time?

Is this commercial or residential? Also if you plan on living in it the rate will be lower. Rates are impacted by the number of financed properties that you own, your debt to income ratio, location, loan value, and banks are very sensitive to market conditions when they release the rates for the day

Do you plan on living in the property? If not, then there's not much you can do to get around the 20% down for Conventional financing. I don't know a lot about hard money loans so I can't offer you much insight there. However, if you plan on living in it, you may be able to go FHA and get in with less money down.

@Jonathon Nila -

Sorry to hear that your lender isn't being overly helpful. Couple thoughts and questions for you. 

Is it your goal to purchase a multi-unit property? It's not uncommon to see a larger down payment requirement for multi-unit properties. For an FHA loan, you can purchase a multi with 3.5% down, but Conventional may require a larger down payment. Depending on property prices out there, 15K on a conventional may not cut it for a down payment in that area. Additionally, your lender may also be concerned about your debt to income ratio. This is the ratio of your cumulative monthly payments (student loans, the mortgage, credit card debt, auto payments, etc.) to your gross monthly income. Since multis tend to be more expensive to purchase than single family homes, your debt to income may be too thin to qualify.

Additionally, do you plan on living in the property? You must live in the property to purchase it FHA for 3.5% down. You don't necessarily have to live in a home on a Conventional loan, but it'll likely be about 20-25% down. From a bank's perspective and experiences, borrowers are more likely to default on a property that they don't live in, so they make you put more down so you have more skin in the game.