All Forum Posts by: Jeff Dulla

@Greg Neuman Are you past the Fannie/Freddie threshold for total number of financed properties? Based on the second bullet point it sounds like you may be and you are getting Non-Prime, Non-QM lending offers that don't have a cap on total number of properties financed. I know of some non-fannie/freddie Wisconsin options but they are going to continue to have similar rate structures. 

@Randy Dickerhoff Your primary will definitely factor into the debt to income ratio. If by BRRR you mean flip your current primary into a rental and buy a new primary, you can do this, but it has to make sense to the underwriting. Typically if you are buying a slightly bigger place or something like that, it is a non-issue.

@Kyle Plants This would be a great strategy. I think the problem most people have is finding someone to give them money. 

There are restrictions to this process though. You borrower money from a family member, create a note. Buy and rehab the property. The initial refinance you can do within the first six months of owning the property is called delayed financing. You can only get back a max of either the original purchase price of the property or 75% of the value (if it is SFH), whichever is lower.

You can't truly pull money out based on increased value until after six months. So your family member may not need to wait the six months because you can probably do the delayed financing refi and pay them back. But you will more than likely have to wait six or more months to get money out of the property for you to continue on investing. 

Hope this helps. 

@Randy Dickerhoff It is a good question and I think Fannie/Freddie tweaked this in the last six to twelve months a bit. I know underwriting will basically default to using the lower of the two - net income and distributions. Also, if they use net income, you have to prove solvency (take basically a quick ratio or measure of current assets to current liabilities). 

However, I have recently spoken to our internal underwriters about this and know it is not that simple or cut and dry. They will entertain using your distributions but will look at things a bit further. Essentially, they are going to want to see that your company has a history of paying out the distribution annually and still be solvent. So they are going to look for at least a two year history and a year to date P&L showing that your company is making enough money this year for you to continue taking distributions. 

I know it can be a pain to send this to people but it helps to have a good lender review your personal tax returns, business tax returns and K-1 in depth. Depending on the lender you went to before, they may have very few options for the loan and were told by underwriting they would only do it one way. The key to a place like a mortgage bank is that they may have a ton of options for different banks/lenders and many of those places will underwrite things differently. 

Please feel free to PM me with any follow up questions. Hope this helps. 

@Steven Cameron My understanding is that you are still stuck with the normal loan to value requirements on a MFH - so 25%. So you are accurate in thinking at most, the largest loan you would be able to get on a Fannie/Freddie refinance would be 75% (if it was a rate/term refinance). However, delayed financing basically says up to the lower of the two amounts - either 75% or a max or your initial investment, whichever is lower. If your initial investment was $95,000, that is the max you can get. And I haven't seen a situation where the lender applies the 75% to that initial investment amount when you are getting a new appraisal at $150,000. 

Unfortunately to do a full cash out refinance, you do have to wait six months. To take that a step further, I believe the max loan to value on a cash out on MFH is actually 70%, not 75%. So $105,000 is the max you could get on a $150,000 value, six months from purchasing. 

@Chris Mason Lol. Good add. I should probably stop trying to answer posts on nice summer weekends!

I meant to say there is no set 1% interest rate increase/add on that I have seen just for buying a MFH. At the most i have seen an increase of .125% to .25% in rate for being an MFH (which probably matches the Fannie pricing hits you posted). Chris' post was much more direct and efficient per usual. Keep up the good work my friend. 

@Rigo V. If it is a portfolio loan, honestly the bank can do whatever the heck they want. From what we see on this side, it is very rare to see a bank ever stray from a loan where they have zero ability to mitigate risk and sell servicing or part of the loan off to someone. And if they do indeed take a loan where they are not able to mitigate risk or a non-QM loan, you better believe they are going to want something in return for that. 

@Rigo V. I believe you are signing paperwork saying that you intend to live in the property for the next twelve months. I know that in the past, there has been this motto of "things change or life happens" to excuse moving out before twelve months. I can tell you from an underwriting perspective though, banks are now looking very heavily into when you bought the home, did you buy owner occupied, did you move out early, and refuse you on even a Fannie/Freddie loan if you are trying to buy another owner occupied ahead of twelve months. 

If you intend on using FHA again, you of course have the issue of proving that the you either had a material life change warranting a larger property (had children) or you are moving far away for work.

@Jason Homa 1% sounds really high. Also there are no Fannie/Freddie, set add on that I know of. So if that is the case it’s a bank overlay specific to that bank. 

Is this investment/non owner occ and you are talking about the difference between your rate and the rate for an owner occupied purchase? Or this lender is telling you there is simply a 1% add on because this is MFH?

@Calvin Lipscomb What kind of companies are you talking to in Chicago? I have a couple smaller bank contacts I can share with you that would look at this type of deal. I don't know if I have ever heard of the example you are giving as being an issue so maybe it's worth talking to one of them.