All Forum Posts by: Jason Wray

DJ,

Although the home has a lady bird deed it would still require you to assume the loan as a "Primary Home" in order to qualify under FHA. You cannot assume the loan under FHA with the intention to "rent" the home. If you can occupy the home as a primary you would not be able to buy another home under FHA.

You would either have to refinance the lady bird home into a conventional loan or buy the next home under Fannie Mae/Freddie Mac - if primary. FHA will also not allow you to close in a revocable trust as most lenders will enforce a "Due on Sale" clause.

FHA has a "100 mile rule" so you cannot use another FHA loan to house hack. Unless you can purchase the first home as primary and show you will be buying the next FHA home closer to work, or out of state.

There is also something called a "Gift of Equity" where you do not have to assume the loan you can use gifted equity for a down payment and closing costs. It's essentially the same as doing a refinance where you take over the family home and the equity acts as cash. The whole Lady bird/FHA thing can have some hiccups and going FHA for your parent's home will cause issues with you getting the next FHA home.

Instead do a gift of Equity going Fannie Mae 5% down (use the gift of equity) to cover and for any closing costs. You will have purchased the home under conventional guide lines and then have "No restrictions" on going FHA to buy the next home. You could also use the current home to pull out a HELOC for the DP of the next FHA home.

Make sure you are talking to an experienced Banker or Loan officer who has handled multiple "Gift of Equity" type transactions to avoid drawn out process or issues in underwriting.  Also I wanted to congratulate you on asking these questions up front to avoid issues.  I have seen many of buyers/investors "Not ask" and then look for help after a lender denied them or caused them lost time and money!

Mixed-use fairly simple need to ensure the percentage % of the commercial space versus residential is within guide lines.  Other than than if you have excellent credit its 25% down.

If it needs rehab work it will open up a can of worms if its "Subject to" and cannot pass appraisal/inspection.  Some renovations loans out there but the rates and prepays can be painful.  

 Good question, It does not say that specifically I am giving a better solution to the ability to use the loan program without issues.  There is a mileage requirement (typically 50 miles) and the  "Underwriters" use common sense that can and will question the intention of the second Home.  We can see the loans that you close on credit and the date it closed.  Most investors try and take advantage of the Primary Home, Secondary home program without concern.

When you buy too close in proximity and too soon in terms of sale date you trigger red flags.  If you purchased a second home in an a state like Florida on the East Coast, there is a reasonable explanation to buy on the West Coast or Jacksonville and then Cape Coral (Distance is key) but you need a reasonable explanation.  Typically the UW will ask for a letter of Explanation written to explain the reason.  

That letter will be placed in the file in case the file gets pulled for a QC or a Pre or Post Audit to detect mortgage fraud.  If you are trying to use the Second Home loophole you need to make sure you and your Banker/Loan Officer are on the same page.  You also have to make sure you do not use a loan officer that is new and has no seasoning.  That can cause you a denial and lost money on appraisals and other fee's if the loan is denied or cancelled.

If you have good credit above 740 and have 25%-30% to put down it's really not a difficult loan process. 8 Units typically will offer a 1.25% DSCR ratio which is required in most cases but the approval is going to be based on the rents. Buying out of state is fine you will only have an issue if you go with a lender with overlays or requires landlord seasoning.

They may question your ability to manage the property if you are out of state in terms of excessive mileage away. The fact that you travel for line work could satisfy a the UW's concerns or supply a letter of explanation.

Felix,

You might be better off trying to go the DSCR route since getting a Heloc on an investment is extremely hard. There are investors who offer them but they usually oly offer 60-65% LTV/CLTV plus it required No income - just rents.

It's good to talk to a Pro in the area in yoour case I would reach out to @Lucia Rushton.

I know Lucia has helped several investors I know and having a good agent is a plus even if you have one now its still worth a quick call.  

Marc,

There are a lot of great companies who offer wealth management and specialize in REI. One company I would advise is "3 Bell Capital" out in California their CEO John Porter is an extremely smart guy when it comes to REI. You may not get him directly but you can also reach out Sunkul Soni he works a 3 Bell as a Senior Wealth Manager.

I would tell you to reach out to Sunkul Soni and I believe he is also a Bigger Pockets member as well.

Brook,

You can buy a Second Home/Vacation in multiple states you just cannot buy more than (1) second Home/Vacation home in the same general area.

My investors take advantage of the 10% down loophole and its really just a matter of upfront planning with your Banker to ensure there is a proper plan in place.  There is a little science behind the up front processing to avoid UW issues.

At the end of the day Vacation homes can still be rented out so it offers a 2 sided coin.  You just have to know how to set them up to avoid issues on the future UW/fundings.

Ruben,

Send me an email or message me I would love to talk REI and offer some insight.

Sara,

When you buy an investment property the Bank/Lender lends you the money for the purchase minus the down payment. Example $200K purchase Bank/lender offers 85% LTV so 15% down payment required. The bank lends you $170K which only covers the 85% and you are required to bring 15% or $30K to closing "PLUS" closing costs unless you get a seller credit.

On a typical loan the Bank/Lender does not cover anything related to repair costs, utilities, or closing costs.

The seller can contribute up to 2% Max on an investment towards closing costs so again on a $200K purchase they could only offer $4K. Closing costs vary based on State and County for Taxes, Insurance, Doc stamps, transfer taxes, Title, and every Bank/Lender requires different points/hard costs.

If you have any specific questions of if your just getting started feel free to message me or reach I out.  I enjoy helping in any way to help make the first steps easier!