All Forum Posts by: Jason Wray

Flor,

There are a lot banks that offer Helocs Quorum, Suntrust, Bethpage CU, PNC all have good options for a primary heloc.  Have you compared a cash out refinance versus a heloc yet in terms of monthly payment.  If the answer is No because of a lower rate on the first mortgage I would still tell you to run the numbers.  Heloc versus a 30 year fixed even if the first rate is increasing offer more than just payment benefits.

A HELOC is an open end mortgage a.k.a debt obligation like a credit card and goes against your DTI debt to income ratios. A Heloc can "Never" be used as an asset or for PITI reserves and can hurt your chances of buying another investment property. Cash out refinance is cash in hand and can always be used as an asset or as PITI reserves needed to qualify for a mortgage.

If you need a heloc for a small project or renovation under $25K it an okay tool but anything over that usually is is better suited over a 30 year.  Keep in mind if you are worried about losing a low rate these rates will get better so you can always refinance in 12-24 months.

The other thing to consider is majority of home owners that take out a heloc refinance in 3-5 years to consolidate that line of credit regardless.  The biggest risk is if for any reason you credit score drops or you go late on any payment on credit even by accident or error.  The bank/lender holding that Heloc will close or reduce your line of credit.  That can leave a project/renovation uncomplete and cause a lot of headache.  Hope that helps offer some additional thoughts. 

James,

It's very common for investors in California to seek "out of state" REI properties due to the price range, taxes and lack of ROI. You would be surprised to see states like Indiana, Ohio, Tennessee, Alabama, Florida still have some great deals. A few of these states offer some realistic price ranges for even multifamily 2-4 unit homes under $200K.

You do not need a lot of skin in the game just 15% down will get you into any 2-4 unit. Spread your cash over a 3-4 properties instead of just "one" rental in California. Now is a great time to buy because you have a few things playing into your favor. Sellers with inventory do not want that MLS to roll over into the next year. Having to cover another year's worth of taxes, insurances and DOM days on the market.

Rates are higher so a lot of buyers are afraid to make the move which is a bad idea because you can always refinance for a lower rate in 12-24 months. That is causing a lot more inventory to sit longer and prices are dropping as we get closer to Dec. 31st. There are also a lot of home owners that want to cash out in this high equity market before anything changes so they have more room to negotiate.

Most owners who purchased these homes got a great deal 3-5 years ago and now are sitting on equity that has multiplied by 100. I would look into Dayton, Ohio, Carmel, Indiana, Citrus County, FL, Knoxville, TN. I have worked with a lot of great agents in all of these states and they are all on her on Bigger Pockets.

Jesse,

If this is an investment property Max 60-65% LTV but if you are living in a unit as a primary call Quorum Credit Union. They will go up to 90% CLTV generally if you have a 740+ and up credit score. They use to go up to 95% CLTV prior to COVID and rise of rates I believe 90% is there Max now for "Primary Home" only.

Do not be surprised with the rates though because Heloc rates are higher than a 30 Year mortgage. It almost makes sense to do a cash out refinance even if you have a low 3-4% rate since its amortized over 30 years versus a HELOC usually 10, 15 or 20 years.

David,

I run across this every day and you will find maybe 1-2 lenders still offering a heloc on an investment at 60-65% LTV. Problem is the rate will be 12-15% and that is not on a 30 year term its usually a 10-20YR term. So when you actually calculate having a 3% first mortgage and a 12-15% second/heloc its more expensive. You are better off doing a cash out refinance and taking a 7-8% since it offers a 30 year mortgage for the lower payment.

If you look at it for the long term you will have acquired another investment rental with positive cash flow and tax benefits. Then in 12-24 months you refinance and lower the rate back down to a reasonable rate you are ahead of the game.

"Marry the house, Date the Rate"...

Sean,

You do not need (2) years of income you can use (1) year W2 or 1099. You can also use 12 or 24 months of bank statements for a gross average of deposits. That is for a primary home so if this is an investment rental you do not need any income just go DSCR.

You have to identify Banks and some lenders who offer alternative programs or Non/QM.  There are also options for traditional loans with a bank that uses private funding and can use a loan committee exception to use (1) year income.

Having a 640 or better fico score is going to be required in most cases.  You can also have a banker/loan officer pull your report and run a "Wayfinder" or Rapid Rescore report to see what is needed to pay down to get that score up in 3-5 days.  Its a great way to manipulate your credit and avoid the credit repair (Scammer).

Just depends on a few factors like Down Payment, Program, Taxes, - In a flood zone?

Instead of building one just reach to "Tiny Homes" there are several places that can prefab it for you or trailer out the complete model.

Get a flood quote and see how it builds into your ROI. Look into an elevation survey to make sure it is in fact a flood zone.

Bundle your insurances if the flood quote is to high by adding Auto, flood and home owners together with State farm or progressive it may be cheaper in total.

Yu - Its real and its a game changer if you look at the beneffits like No UFMIP to avoid the 1.75% fee. Lower MIP/PMI .55% versus in most cases .18-.35 and the PMI falls off at 80% versus FHA is for the life of the loan. FHA also now has a 12 month cash out rule and not on conventional/traditional loans.

You also "Do Not" have to be a first time home buyer and it allows for refinance not just purchase.

John,

Good advice from Jaron about "full Bath" versus Half bath and you also want to make sure that the basement is finished and livable. Keep in mind there is no guarantee this will add value to the home because the appraiser takes in a lot of factors in order to use that as a "gross adjustment". I have seen customers put thousands of dollars into a basement only to find out it did not gain value due to the other comparable sales.

A basement is not given GLA because its below ground so many appraisers who are not well versed or seasoned can botch a report/value.

This may seem like a common sense piece of advice but make sure you "Pull a permit" for the work prior to starting. I have also seen customers not pull a permit and end up stuck not being able to refinance or sell the home until the inspector does his/her duties to approve.