All Forum Posts by: Ed Wood

Many people are mixing DCR which is a commercial ratio vs a DTI being a conventional loan ratio. DCR is NOT used when calculating conventional loans. Here's IS how underwriters calculate income on 1-4 unit investment property.

1) If you own the property for less than 1 year (AKA not on your tax returns or is the subject property the formula is: rent x 75% - PITI = usable income. The property must already have a tenant and you will need to produce a rental agreement. So other documentation may be required.

2) For the investment properties you've held for 1 or more years where they are on your schedule E they will use the the income and expenses from this schedule. Good news is they add in any paperlosses like depreciation and any 1 time expenses such as a new roof, new kitchen, etc you can prove with organized receipts.

Schedule E Calculation:

Non-Subject Property:
Add
Line 3
Line 12
Line 18

Minus
Line 20

Divide by 12 - mortgage payment = net income

Subject Property:
Add
Line 3
Line 9
Line 12
Line 16
Line 18

Minus
Line 20

Divide by 12 - PITI = net income

If you've had the property on 2 years of returns and the income is increasing they will average the 2 years if the income is decreasing they will use the most recent. With loans underwriters will ALWAYS use worse case.

That's the scoop! Still not convinced? Starting on Page 323

https://www.fanniemae.com/content/guide/sel011713.pdf

have the city inspector out? Go look at the permits they do have on file?

Thought I'd share how much a difference it makes having quality photos for listings.

@Bill Gulley

I wish all lenders would work off the same page until the feds get this area tighened up and maybe that will be Jan 10, 2014. Mortgage APR should include all settlement costs that would come up in an all-cash transaction leaving some items open to lender interpretation. Here are a few items some lenders do not include in the APR while others will include in the APR.

Appraisal Fee
Appraisal Update/Completion Report
Credit Report Fee
Lender's Title Insurance Fee
Notary
Abstract & Attorney Opinion Fee
Early Issue Title Insurance Fee
Lien Search
Mortgage Certification
Municipal Lien Certificate Fee
Name Search
Plot Plan/Plat/Survey Search Fee
Title Endorsement(s) Fees
Title Enforcement Fee
Title Search/Exam/Abstract
Termite/Pest Inspection
Recording Fee

Lenders only need to produce a GFE if you provide all 6 of these items below. More than likely you're just shopping rate and don't want to do a "mini-application" and want to stay somewhat anonymous and in control of the conversation. In this tread I wanted to empower people to have the necessary information so they can request a accurate rate and just the lenders fees.

6 required items to produce a GFE

1. Borrower’s Name

2. Borrower’s Income

3. Property Address

4. Property Value

5. Loan Amount Wanted

6. Buyer’s Social Security Number

@Bill Gulley

I agree APR is a the best way and is supposed to be the perfect method IF all lenders used the same calculations in creating the APR. You might have one lender that will give you the APR with title as a APR item because they're in "over-compliance-mode" and they may have the best deal but the other lender doesn't put title as a APR item so their APR looks lower. In my opinion this is why I prefer asking what the lenders only fees are leaving out the 3rd party fees like title, escrow, etc.

here's a whole policy and procedures if this helps

http://www.qvir.com/uploads/2/8/6/9/2869254/housing_maintenance_program_policy.pdf

just to give you another idea on this, for conventional investment property loans 6 months PITI reserves is required in addition to 6 months rent loss insurance.

hmmm I guess it depends on how much work your doing, if you're hunting down the deals, writing a ton of offers per acceptance, negotiating and all the other partners are sitting back then I would think you deserve the commissions. If all of you are hunting down the deals putting the same effort forth except for doing the paperwork then maybe not much commission? Get a transaction coordeinator so you're not doing the extra work?