All Forum Posts by: Greg Dorn

One last thing to add is that when you have very little equity in a property the FHA Mortgage Insurance Premium (MIP) is less expensive than Conventional loan's Private mortgage insurance (PMI). If you are close to 80 percent then doing a conventional loan refinance makes sense but you should be careful. Getting the PMI off a conventional loan happens when you request it because you beleive you have over 20% equity (but you will likely have to pay for an appraisal to show that and that will run you $500+ right now) or once you pay down the balance below 78% LTV with the numbers that were listed in the refinance loan. If you are going to rely on appraisal route you are also hoping the market stays where it is at which is always a risk.

I would say your best route is to do a rate and term refinance into a conventional loan. You will at least have the option of getting the mortgage insurance off which is better that what you currently have. Although you did do an FHA loan before which means that it will depend heavily on where your credit is at currently.

So sorry to hear about the appraisal problems. They are pretty rampant in industry right now. It sounds like you are leaning towards the HELOC option with your in-laws which would likely be the fastest closing (possible to have a lender close quickly but not likely).

If it helps your in-laws you can have the note recorded with your deed so they have something secured against the property. A note by a non-traditional lender will mean you have to get an appraisal for the refinance which you were already expecting so not a big deal. If you do refinance within 6 months the lender is going to want to source the funds from the purchase and that is where you would have to show that your in-laws use a HELOC but that should not be an issue.

Only other areas of concern I would express would be if you are continuing to do STR from the property and need the income to qualify for your long term financing you will need a 2 year history of income from the property for FNMA financing. That is normally in the form of tax returns so something to consider as you will not have that. If you can support all payments with your other incomes then congrats and best of luck.

Hey @Gerred Q Edwards. So you can do both purchases at the same time. Biggest thing is that you have to disclose on both loans that the other is happening and you need to be able to service both loans with your income. Only other recommendation would be to work with the same lender or broker for both deals because the paperwork is going to be the same and it will make it more efficient than you trying to coordinate with 2 different lenders.  

Main thing right now is that the rates are still incredibly low and so if you have non-performing assets you should sell those and ideally do a 1031 exchange into a better deal in a better market. You will pay more for a new deal when prices are so high but if you transition to a different market that is improving then you would hopefully get into a better deal. 

Great questions! If you do stay there then you can use conventional financing which gets you the same great rates as if it was your primary residence property BUT there are some rules about Second homes that you should always be aware of. 1) Second homes can only be single family residences AND 2) you can only have one second home loan at a time.
Also you can use the income if needed to qualify but it is really more for the case of a refinance and not for a purchase because to use STR income for a second home the income has to be from the property you are refinancing, it has to be a fixed rate loan if you are using a FNMA (Fannie Mae/Freddie Mac) loan, it cannot be a PUD or Condo that restricts STR, and you have to show tax returns with the income. STR are rated as a business owner so 2 years tax returns as well as a YTD profit and loss.

Hey @Evan Westerman, So if you have people that you want to work with an have a good marketing strategy then @Cara Lonsdale is correct and you need to find a good lender who has a variety of lenders they work with. Usually this means working as a mortgage broker. The broker I work for has over 75 lenders we work with so it is a great opportunity. I would be happy to answer any other questions you may have if you would like to chat. Have a great 4th of July weekend!

@Account Closed is correct from the way the lenders look at cash out compared to rate and term loans. If you have 1 or 2 loans on a property recorded on the same day it is a rate and term refinance. If you can pay 100% cash for the property put a lien on it and if you use a hard money lender just have the same title company record a second on the same day. You should not have issues with doing a rate and term refinance which is much more cost effective than cash out loans

@Eric Brantley One thing that I would consider doing right now with the 1st property is a Streamline FHA loan. If you have a higher interest rate from the purchase you can do a refinance still in an FHA loan but get the rate down as low as 2.25%. This will help improve your cash flow and then I agree that if you can prove that you are in need of a new home (family is growing, Employment related relocation (more then 100 miles)).

If you are going to do a conventional for your next purchase and it is a 2 unit property then you will need to do 15% down, if it is a 3/4 unit property you will need to do 20% down, and if it is a Single Family with an additional dwelling unit/mother in-law then you can do with 5% down (the ADU is not considered multifamily if it does not have separate utilities/a separate address).

@Gina Rutigliano this is a great question. So doing research I found a few notes (just cause not sure what kind of loan you have). 

VA, FHA, and USDA will probably not let it go through because they do want it to be your actual personal primary residence. If you dont occupy it at the time of the application they ask if you travel for work or if you are in military, if you will live there more than 2 weeks per year, and if you own another primary residence (and then it rejects it if you answer yes).

Fannie and Freddie will both allow it as a primary residence with a letter of explanation. You will just have to keep looking for a lender that is willing to learn what is allowed for your particular situation. Most of the time it is just a matter of there being too much to understand and they are telling you something based on what they think the underwriter will say and not what the underwriter will actually allow. Just keep looking for a broker/lender that will do the research and go to bat for you with an underwriter (I would but I dont carry a license for TX). 

• Relationship between the client and person who will be occupying the home.
• If the person is financially able to qualify on their own.

So I am not looking for a local lender in that market as I am working in my own local market for the next little while. For cash out investment property mortgages I have not seen incredibly competitive Conventional loans (at least compared to owner occupied loans) so portfolio held loans from a local bank may be the best option for you @Josh Gregory.  Best of luck