All Forum Posts by: Jerry Padilla

@Account Closed

As mentioned above you can use any lender that writes loans in the market you are purchasing property. You should focus on finding a loan officer that is familiar with writing loans on investment properties. This way they are well aware of the guidelines, associated with rental property. 

@Chris Maurice

Home Possible is an option as mentioned above. The max is only up to conforming limits and if your income doesn’t fall within the restrictions, you have to search for locations that have no income limit restrictions. 

@Tom Nellman

It is ok to use your 401k as a down payment from the financing side of things. Make sure to check the terms and conditions of your 401k. It could be used for reserves as well but you would need to show the Terms of Withdrawal. If you max out the terms for withdrawal than you wouldn’t be able to use the money for the reserve requirement.

Maximum Loan Limit Look up for your area can be found here;

Look Up Conforming Limits For Your Area!

• Current appraised value is used to determine LTV
• Property must not be for sale, and must be taken off the market on or before the disbursement date.
• A Rate & Term Refinance can be used to pay off existing unpaid principal balances on the subject property, closing costs, prepaids, and points.
• No seasoning requirement.

Freddie Mac and Fannie Mae are both conventional lenders. They each have their own set of guidelines to be followed. There are investor friendly lenders that are able to specifically follow just one set of guidelines below. Below are the required LTV for Rate and Term Refinances.

Freddie Mac - min credit score : 620 - up to 6 mortgaged properties

Fannie Mae - min credit score: 620 - up to 6 mortgaged properties

Min credit score: 720 - 7-10 mortgaged properties & minimum loan amount of $50k at property 7 and above.

THESE ARE FOR MORTGAGED Properties 1-6; For Freddie Mac, a Rate and Term Refinance for a Primary Residence;

• 95% for 1 unit
• 85% for 2 unit
• 80% LTV for 3-4 units

THESE ARE FOR MORTGAGED Properties 1-4; For Fannie Mae, a Rate and Term Refinance for a Primary Residence;

• 1 unit - 95%
• 2 unit - 85%
• 3-4 unit is 75%

THESE ARE FOR MORTGAGED Properties 1-6; For Freddie Mac, a Rate and Term Refinance for an Investment Residence;

• 80 - 85% for 1 unit and 75% for 2-4 Units..... Up to 6 mortgaged properties allowed.

THESE ARE FOR MORTGAGED Properties 1-10; For Fannie Mae, a Rate and Term Refinance for a Investment Residence;

75% for 1-4 Units

Fannie Mae Guideline for Rate & Term, Mortgaged Property 1-6.

Fannie Mae Guideline for Rate & Term, Mortgaged Property 7-10.

Freddie Mac Guideline for Rate & Term.

Cash Reserve Requirements;

6 months PITI is required on subject property.

If you have 1-4 financed properties than it is now 2% of all unpaid principle balances.

If you have 5-6 financed properties than it is now 4% of all unpaid principle balances.

If you have 7-10 financed properties than it is now 6% of all unpaid principle balances.

Money must be in account for 60 days or sourced. A HELOC can be used as down payment, but not as cash reserves.

Acceptable Sources of Reserves; Cash and assets that are liquid or near liquid

• Checking or savings accounts
• Investments in stocks, bonds, mutual funds, certificates of deposit, money markets funds and trust accounts
• The amount vested in retirement savings accounts
• Cash value of a vested life insurance policy

  Certain assets must be “discounted” when used for reserves. Terms and conditions of liquidation may be required depending on the asset used for reserves.

  Assets Requiring Liquidation
  The following may be counted as cash assets at 100% of verified liquidated amounts:

  • Cash value of life insurance
  • Publically traded stocks
  • Bonds
  • Mutual Funds
  • U.S. Government Securities
  • Savings Bonds
  • Retirement Funds
• Gift Funds - Primary Residence and Second Home ONLY

STATES WE LEND IN:

Alabama, Alaska, Arkansas, Arizona, California, Colorado, Connecticut, Delaware, District of Columbia, Florida, Georgia, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Dakota, South Carolina, Tennessee, Texas, Utah, Vermont, Virginia, Washington, West Virginia, Wisconsin, Wyoming

Recent changes to CASH OUT Financing;

- Conforming limits increased across the board everywhere! Here is a link to see the max for your area!

Look Up Conforming Limits For Your Area!

BRRR / BRRRR....... Buy Rent Rehab Refinance..........& Repeat

CASH OUT FINANCING

A cash out refinance is a refinance of your property that allows you to pull equity out of a property. The mortgage can either be paid off free and clear or can have a low enough balance on the current mortgage versus the value, to make it worth pulling out the equity in the property. Cash out refinances are available on primary, second homes and investment properties.

• The typical cash out financing is done after 6 months of owning the property, based on ARV and available for mortgaged properties #1-10. Please see delayed financing for less than 6 months after closing.
• On a primary residence you can pull out up to 80% LTV on a SFR and up to 75% LTV on 2-4 unit multi-families.
• On an investment property; A SFR if you have #1-10 mortgaged properties, you can pull out up to 75% of the equity and on 2-4 units is up to 70% equity.
• On an investment property; If you have #7-10 mortgaged properties, including subject you are required to have a credit score of 720, and are subject to a minimum loan amount of $50k!
• PROPERTIES LISTED FOR SALE - Must be taken off of the market prior to disbursement date of the new mortgage.

Cash Reserves Required For Other Properties Owned by Investor, if doing a cash out on investment property;

Cash Reserve Requirements;

6 months PITI is required on subject property. If you have 1-4 financed properties than it is now 2% of all unpaid principle balances.

If you have 5-6 financed properties than it is now 4% of all unpaid principle balances.

If you have 7-10 financed properties than it is now 6% of all unpaid principle balances.

Money must be in account for 60 days or sourced. A HELOC can be used as down payment, but not as cash reserves.

DELAYED FINANCING EXCEPTION

Delayed Financing Exception

A cash-out refinance within 6 months of a purchase transaction when no financing was obtained for the purchase transaction are allowed under the following parameters:

• The new loan amount is not more than the actual documented amount of the borrower’s initial investment in purchasing the property, plus the financing of closing costs, prepaid fees, and points (subject to the maximum LTV).
1. CASH OUT FINANCING AND DELAYED FINANCING HAVE THE SAME LTV REQUIREMENTS - BUT DELAYED FINANCING IS SUBJECT TO A MAX OF PURCHASE PRICE PLUS CLOSING COSTS.
• The purchase transaction was an arm’s length transaction
• The purchase transaction is documented by the HUD-1, which confirms that no mortgage financing was used to obtain the subject property. The preliminary title search or report must also confirm no liens on the subject property.
• The source of funds for the purchase transaction can be documented (bank statements, personal loan documents, HELOC on another property). Any loans used as the source for the purchase transaction will be required to be repaid on the new HUD-1.

  Funds received as gifts and used to purchase the property may not be reimbursed with proceeds of the new mortgage loan. Funds of gifts are not allowed with investment purchases.

• All other cash-out refinance eligibility requirements are met and cash-out pricing is applied. This is allowed on primary residences, second homes and investment properties per cash-out guidelines.
• Ineligible Transactions 
  • The following transaction types are not eligible as cash-out refinances:
  • The subject property was purchased by the borrower within the six months preceding the application for new financing except if delayed financing guidelines are met
  • The subject property is currently listed for sale
  • The existing mortgage is a “restructured mortgage”
  • Transactions in which a portion of the proceeds of the refinance is used to pay off the outstanding balance on an installment land contract regardless of the date the installment land contract was executed.
  • The new loan amount includes the financing of real estate taxes that are more than 60 days delinquent and an escrow account is not established.

  Freddie Mac's Guide to Refinancing, including Cash Out.

  Fannie Mae's Guideline to Cash Out Financing.

Fannie Mae Guideline for Cash Out, Mortgaged Property 5-10.

STATES WE LEND IN:

Alabama, Alaska, Arkansas, Arizona, California, Colorado, Connecticut, Delaware, District of Columbia, Florida, Georgia, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Dakota, South Carolina, Tennessee, Texas, Utah, Vermont, Virginia, Washington, West Virginia, Wisconsin, Wyoming

@Alec McGinn

I invest locally. I have a couple of SFR and a couple of duplexes. I started out with a duplex using an FHA mortgage, for the loan down payment and to get started in the business. I manage all of my own properties, but do hire out work now that we have kids. Just my thought, that it was easier starting out purchasing a duplex and living in one of the units.

@Alec McGinn

Why not start a little easier with purchasing a SFR or MFR on your own to get some experience being an investor?

You only need to put 15% down with conventional on a SFR investment property.

@Basu G.

Same questions as above, as well as what is the loan amount going to be?

@Robert Carson

Are these properties going to be 2-4 units or more than that? 

@Derrell Grant

Work on bringing your score up. Do you know what the issues are that are bringing your score down?