All Forum Posts by: Jason Wray

Stephen,

Be very cautious because that makes little sense, meaning  you qualify a borrower for a construction loan up front prior to the work being done or the start date. The reason you do this is to qualify them up front so you can run and assign the approval, lock the rate, approve the builder, review the Blue print, cost analysis and more. If the loan officer told you something up front and now they are failing to restructure the loan or telling you to "Wait" that is a bad sign.

Also please understand Banks & Lenders do not have a "Talk to the manager" clause when the customer or agent is unhappy. What I mean is you cannot argue or demand a loan be approved based on being unhappy if the loan officer made a mistake. If your DTI is to high or any other reason for denial there is "No manager" that can give you or your agent a "fix".

Unfortunately, a customer or realtor can never have a conversation with a bank/lender where it will resolve a loan issue. Only reason I mention this is because you may want to get away from that lender to not lose earnest money. It's fairly common in the lender business that 75% of loan officers "Do Not" have construction loan training or experience. Instead they tell the client "Yes" they can do it but then rely on their processing team to see if it will work or be approved.

Construction loan programs are not easy you cannot just do them if you do not fund them regularly without proper training.  My advice get a second approval or opinion and do not let time pass.

Susan,

So many locations to choose from it can be hard to start but if your state/city has a high number of tourism even majority of the year it can be a great balance. I am here in Florida and over the last few years it has spiked through the roof. Highest rents during and right after Covid which caused a rush by many investors to flock to our market.

Seasonal rentals are good if you are in a cold area and you want to use it for both income and personal use a few times out of the year. Nothing better than packing up some of your personal items when it's cold and snowing and head down to a "Free" vacation rental stay in warmer weather.

One good thing is if you finance them out of state you can use the Second Home/Vacation home to save on the 10% down payment. Whichever STR agency you are going to use study the laws and regulations, as well as taxes and fee's for AirBNB/VRBO or other. Lastly do not over think it if you feel it's a good move don't second guess it take the leap.

James,

I guess I can say "luckily" I am not old enough just yet but on the other hand over the last few years, I missed out. Here in Florida some of the best deals are "Always" in the 55+ community I mean really good deals. If you are not 55+ then you cannot buy the property in the majority of the communities around Pinellas County, Citrus, as well as Lee and Hillsborough, that I know of anyway.

I seen a 4 bedroom/3Bath Townhome last year in a "great" community well kept - huge cement wall all around property, beautiful lake, 3 pools etc. Price was $229K with a $160 HOA and low taxes. I honestly wanted to buy it for myself to live but renting would have cash flowed nicely. I check the page and Bam...55+ I was bummed.

All in all I think they are great if you find the right community and the HOA fee's are decent and the management is not over the top too crazy as far as the overall do's and do not's of the place.

Colin,

One option is DSCR you have a few options when it comes to the rents which is how they qualify for the financing. In most cases if the property is debt servicing itself it can be done but they prefer a 1.25+ DSCR to get a better rate. You can ask for an exception to use the greater of the two to avoid the typical "Lesser of the two". To do that you just want to demonstrate compensating factors which will alleviate the risk.

Keep in mind if you are looking to take cash out your LTV is capped on a 7 unit depending on which investor you use. You might get a higher LTV on a true commercial loan but the rate/term might be worse.

Eduardo,

Reach out to @Lucia Rushton she is on the forum here on Bigger Pockets.  Lucia is a great real estate agent in DFW and can guide you correctly.

Lee Ann,

I have seen an increase in investors buying in TN and Knoxville, and around Nashville is still a Hot market. You really cannot beat some of the home prices in and around Knoxville especially with annual property taxes some as low as $400 a year! You still have the Mountains and the STR market there will a always be hot for the most part.

1031 exchange is smart and easy in terms of the sale and making sure all of the boot is used on the new purchase. Its fairly easy to handle on the finance side as well if you are going to use a mortgage for the loan and the 1031 for the down payment. Regardless of what you put in you can always pull out with a cash out refinance 6-12 months after the sale.

Have you played around with the idea of doing a cash out refinance on the NY home and using the cash as a down payment for the TN property. Just wondering if there is a sweet spot to rent the NY property to cash flow and pull out just enough to cover a down payment ot enough for the TN purchase. Would be better to have (2) homes debt servicing themselves with some cash flow for higher assets/equity down the road.

Mirbeni,

Sounds like you are moving into a direction of growth which is great. Few things to help offer some insight or options. If you own your own business and you have a "Business Checking account" you need to start paying all of your vehicles and credit cards out of the business account if you are not doing it already. If you can show either 12 months cancelled checks or 12 months bank statements showing vehicle's or credit cards paid from the business account the bank "Omits" or removes the debts from your personal DTI.

Have you calculates what would be the maximum amount you could take out of your home either cash out refinance or line of credit to use as a down payment versus selling the home. If you can get out enough cash and still cash flow it might make sense to keep the home. One important tip is make sure you take out the cash or line of credit before you move out so you can get the primary home LTV and rate.

Once you move out its non-owner occupied and the rate is higher and LTV for max cash out goes from 80% to 75% LTV. Buying a 2-4 unit is just a smart move in general because it allows you to buy a future rental with less money down. It also decreases your overall payment on the mortgage since you have another unit(s) helping with the monthly PITI payment.

You can also take out a Heloc or Heloan that will keep that first rate of 2.25% in place. Mortgage rates have come down since December so it helps afford the new cash out payment.

Ursula,

At the end of the day as a landlord/owner you do not want to rent to anyone who has bad credit and does not pay their bills. You also want to avoid "tire kickers" or people who are not ready to rent and just wasting time. How you avoid that in most case is to take an application for a pre-screen to do the research.

Like a Banker we need to take an application before we send out an approval and that’s not much different than renting a home. What I would say is develop a script that you use to make the prescreen seem like its a renter tool or "benefit". You could say we use this as our way to keep all interested parties in our "Approved" database so that as new properties come up you are already in the system. This helps you have a better chance on being the first person to know when a property is available.

Basically helps us gauge your income and your Max monthly payment so that we can align you with the right rental. Although we do look at credit its not an ultimate decision maker instead its just a way to verify who you are in a legal way other than a simple drivers license to protect all parties.

No, a heloc is based on current appraisal not future. There is a renovation loan that uses the ARV to lend in "Advance". meaning if you need cash to renovate or build its uses the future value ARV and lend off that usually 80% LTV/LTC.

If you are talking about an investment property its even harder in terms of a Heloc. Even once the homes is renovated a Heloc on an invesment property is tough to find. The lenders that do offer them want a 60-65% LTV Max and offer a higher rate versus a cash out refinance.

Alexander,

Manual underwrite basically means that when a bank/lender runs its approval its done through an electronic process thorugh software DU/LP that gives a finding. Usually Approve/Eligible, Ineligible, Caution, Refer, etc. When the DU/LP approval cannot be given due to a "lower Fico" or "DTI" is above the banks/lender Max DTI allowed. There area few other reasons but in most cases its due to higher "Risk".

All loans are Fico Driven for the most part so when the Fico scores are lower/DTI is higher it will always result in a higher rate on Manual Underwrite. You will still submit the basic documents while each bank/lender has different requirements. Usually its:

last (2) years W2's or 1099's, 

Last (2) paystubs as of today they generally want Dec 31st last paystub for 2023 to show year to date, 

Drivers license, 

Copy of the account where down payment funds will come from - Bank statements (2) months all pages.

If you own a business they can also require your 1120's or 1065's depending on the income they are using.