All Forum Posts by: Jared Bouzek

Matthew Arreola The LTV is as high as will be allowed with Conventional financing for cash out - 70% multi family and 75% single family. The rates sound high but I don't know your exact credit scenario. Like you said, with excellent credit you would probably see the single family a little more than a 1/2 higher than current OO rates and the multi family approximately 1/8 to 1/4 more than the single family NOO just based on Fannie's standard "hits".

@Andrew Espinosa Welcome to Bigger Pockets. If you're drawn to real estate investing, you've come to the right place. Soak up the information already available in the forums and feel free to hit us up with questions.

@Christopher Arter Using 75% of rental income is a standard defined by Fannie Mae and Freddie Mac. These organizations set the guidelines for Conventional mortgages on a national level. Individual lenders are allowed to have overlays on top of those guidelines which make their own guidelines more stringent than Fannie Mae or Freddie Mac require but that is of their own choosing. That is why you see the variation in this policy from lender to lender. As was mentioned above, you need to find a lender who will lend per the Fannie guideline.

Lenders will not count 100% of the rental income because there are expenses involved with renting property. The 75% number is used because lenders know you will need to set aside money to manage those related expenses.

Thanks for the tag @Chris Lopez and sorry for my delayed response.

@Charlsi Kelley I guess what you would be attempting to do with the financing is a bit like finding a needle in a haystack. You need somebody who is #1 willing to go in second position, #2 lend up to 95%, #3 bet heavily on appreciation in the coming year, and #4 from your wording of getting a lower mortgage payment I assume you would be seeking somebody who will allow a single-pay balloon option. I don't know what your chances are of finding somebody who would take on that level of risk and #4 likely isn't even allowed under Fannie Mae guidelines given your scenario. 

In addition, I don't think you would gain anything from a financing perspective by doing what you're suggesting. Option 1 is put 5% down now with owner-occupied financing which would be on a $342,000 loan amount with current rates. Option 2 is take the risk of where rates go in a year and then cash-out refi to virtually the same loan amount with NOO interest rates. The max LTV to cash out NOO with conventional financing is 75%, so you would need around a $460k appraisal to accomplish this.

You are better off just putting your 5% down and not jumping through the extra hoops to not really gain anything.

@Doug Dillmuth Welcome to Bigger Pockets. You're in a good position to get started from a cash standpoint. How you choose to deploy that capital is going to depend on your personality, goals, and risk tolerance. Take some time to soak up all you can from Bigger Pockets. The answer may not necessarily be in quantity of properties but more in quality.

Agree entirely with @Chris Mason. Yes there are programs out there for owner occupants for 3% down or even 1% down on single-family but the "no PMI" is a marketing trick that's really advertising LPMI.

@Jeff White One thing you want to be aware of is that this is not considered to be a commercial property nor will a commercial appraisal be used to value the property. When purchasing multifamily with FHA financing, valuation will use a residential appraisal which will use the Sales comparison approach - not the Income approach. So your nearby comps are going to be what drives your value.

A couple of other issues could come up here as far as your financing. If you are dependent on the rental income from the other three units in order to qualify, the lender is going to count 75% of the lesser of market rents or current rents, so hopefully they've already taken that into account. 

Another item to think about is FHA's self sufficiency rule for 3 & 4 unit properties. If you take the market rents for all four units, total them up, and multiply by 75%, the resulting number must be greater than your total monthly PITI in order for you to get FHA financing. Hopefully the lender you're working with explained this to you long before you started looking at 3-4 unit properties with FHA financing. If you're right about market rents being $1200-1400, you're probably okay, but if they go much lower than $1200 you may run into issues meeting self sufficiency judging by the little bit of information you've shared here. If you can't meet self-sufficiency, you will need to bring in quite a bit more cash to make FHA work and 3-4 unit properties come with additional reserve requirements with FHA financing.

This is one scenario where being downgraded to a duplex may save your financing if you can negotiate through that issue with the seller.

Hi Deb Walker and welcome to Bigger Pockets. From reading what you wrote, it sounds like your scenario is relatively complicated and there are probably a lot of details you don't want to post on a public forum. From a mortgage qualification perspective it sounds like you could have a couple of options depending on whether you want to stay in your current house or would prefer to move. One option that would probably be very helpful to you would be a reverse mortgage. Depending on some of your specific circumstances you could use this to access equity without introducing a principle and interest payment and just continue to pay your taxes and insurance as you are now. Another option is that under conventional mortgage guidelines you can potentially use your assets as qualifying income if you were going to purchase a new primary residence and you were uncomfortable with the reverse mortgage. You would only use this if you plan to move because you cannot pull cash out when you're using assets as qualifying income and it can only be done on a primary or second home. I feel like it's hard for me to be much more specific than that but it's difficult not knowing more of the specifics of your scenario. That should at least give you a starting point. Let me know if you have any other questions.

@John Samuelson If you're not going to hang on to it, why go through the hassle of putting $15,000 into rehab to resell in the low $400s? Let's say you put $20,000 into it to account for closing costs, holding costs, and any cost overruns, so you have $380,000 into it. I don't know if you can list on your own or not but I'll give you the benefit of the doubt and say you do. So if you sell for $415,000 you net maybe $400k after paying the buyer agent & miscellaneous costs and pocket around $20,000.

Why not just wholetail it? You already know it could go close to $400,000 without any work. You net ~$385,000 after paying the buyer agent and selling on your own. Pocket $20,000 - $25,000 depending on how much your closing costs were when you purchased and you didn't have to go through the rehab.

@Nathan Poole If you're looking for more information on house hacking, use the search tool in the upper right hand corner and search "house hacking". You will probably find more reading material than you could ever get through. Also set up some keywords under your profile for local cities like "Denver", "Littleton", etc. Then when somebody posts about the local area you will get a notification and can join the conversation. If you have any questions about financing in relation to house hacking, feel free to ask away.