All Forum Posts by: Jerry Padilla

@Gary Ahu

Cons:

You could only do delayed financing if you paid cash for the property with conventional financing. Delayed financing will limit you to a maximum of the purchase price plus closing costs, and prepaids. 

Pros: 

Cashing out sooner on the property. 

@Bob Kirkley

There are many factors that come in to play with DTI's. It depends on whether the property is a primary or an investment as well as what program you are using. The best route to go is to speak with a lender or get pre-approved. I am glad to answer financing questions that you have, but would need more specifics.

@Alfred Harris 

What are your intentions with the appraisal?

Are you looking to sell? Then a realtor can take a look and give you an estimated value on what to list the property at without having to pay for an appraisal.

If you are wanting to do a cash out refinance or rate and term etc. Then the bank will do their own appraisal, that you will have to pay for. You wouldn't be able to bring in your own appraisal. 

@Adam Buzzell

Reading over your scenerio, one route that you could go with conventional financing, if you have 4 financed properties or less, including subject, you could do a renovation loan. 

Fannie Mae's HomeStyle Renovation loan allows for a SFR investment purchase. Let me know if you would like more info on this route. Also this route only requires 15% down for a SFR investment property.

@Daniel Mrowca

If you currently have a 4 unit primary, and you are trying to purchase a 4 unit primary, it will be difficult to get through underwriting. An underwriter is going to see that your intention is to accumulate more rental property. You stated you also currently have a pending offer on a SFR. Going from a 4 unit to a SFR is much easier to get approved than going from 4 family to 4 family. If the SFR property has been converted to a 2 unit, how does the county view the property now? If you are doing SFR financing and it is a 2 unit income property an appraiser is going to see that and you will most likely have an issue with financing as a SFR.

As stated above, Freddie Mac has a conventional product - Home Possible - but you are limited to their no income limit area's if you don't meet the income restricted area's. 

To answer your question, I am also aware of a portfolio product that will allow you to get in as low as 5% down on a four unit primary, but rates wouldn't be as low as conventional. That product may also have difficulty getting through the underwriting process if you already own a 4 unit with FHA.

@Philip Claessens

I am glad to answer any questions that you have on purchasing investment properties. For Conventional financing A SFR requires an LTV of 80 - 85% and an MFR is 75%.

FHA Standard Loan Amounts

- Maximum loan amount as determined by FHA (Conforming Loan Limits depending on location and number of units - below)

- Each county has its own individual area ceiling limit, and can be found here;

FHA Loan Limits

House Hacking With An FHA Mortgage - FHA Financing;

No Maximum Financed Properties

This is an Owner Occupied Mortgage Product.

Inducements to Purchase

• Contributions up to 6% of the sales price from seller towards closing costs.

Down Payment Requirements

• Minimum down payment into the transaction of at least 3.5%. Gift funds are considered part of borrower’s own funds.
• 60 day history is required to verify the source of the down payment.
• Gifts may be funded by an immediate family member....... But must be verified by 60 day history, and must be a gift with no requirement to pay back.

Reserve Requirements

• 3-4 Unit owner occupied properties must have 3 months PITI

Three (3)- and Four (4)-Unit Property - Must meet the Self Sufficiency Rule Below!

The maximum mortgage amount for 3-4 unit properties is limited, so that the ratio of the monthly mortgage payment, divided by the monthly net rental income does not exceed 100%, regardless of the occupancy status. This is also taking into consideration, a 25% vacancy factor.

Fee's associated with FHA Financing;

Upfront mortgage insurance premium (UFMIP), and

Annual insurance premium which is collected in monthly installments

Upfront Mortgage Insurance Premium - For 15 year and greater than 15 years.

• 1.75% of purchase price

Annual Insurance Premium

• Greater than 15 years & greater than or = 95% LTV - 0.85%
• Greater than 15 years & less than 95% LTV - 0.80%
• Less than or = 15 years & Greater than 90% LTV - 0.7%
• Less than or = 15 years & less than 90% LTV - 0.45%

Annual Insurance Premium For Higher Balance Loan Amounts - Greater than $625k

• Greater than 15 years & greater than 95% LTV - 0.105%
• Greater than 15 years & less than or = to 95% LTV - 0.1%
• Less than or = to 15 years & greater than 90% LTV - 0.95%
• Less than or = 15 years & less than or = to 90% LTV - 0.7%
• Less than or = 15 years & less than or = to 78% LTV - 0.45%

INCOME—RENTAL

• Any net rental income from the subject property must be added to the borrower’s qualifying gross monthly income by applying 75% of the lesser of;
• Fair Market Rent reported by the appraiser; or The rent reflected on the existing or proposed lease agreement.

History of Rental Income.

When a borrower has a history of receiving rental income from the subject property since the previous tax year, the borrower must provide most recent Federal Tax Returns, including IRS Schedule E, covering the previous two (2) years

FHA Rate and Term Refinance -

Maximum LTV is 97.75%

FHA Cash Out Refinance -

Maximum LTV is 85% of appraised value if property has been owned 12 months or greater, and if less than 12 months from purchase than the lesser of purchase price or appraised value is used.

For more info on an FHA 203k loan refer to this link;

FHA 203k Financing

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 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

Cash Reserves Required For Other Properties Owned by Investor.

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

@Lydia Woods

For conventional financing, a loan officer is going to look at your income, DTI's, credit, tax returns, savings etc, to ensure you are able to pay the mortgage. It will be a similar process to applying for a primary residence.

You have the ability to cash out on investment properties as well to pay off other debt, or to use as a down payment, for more purchases. Let me know if you want more info on requirements for any of these options.

For investment property purchases the LTV is; A SFR requires an LTV of 85%, and A MFR requires an LTV of 75%

For investment property cash out financing; A SFR you can pull out 75% of the equity and on 2-4 units is up to 70% equity.

@DeMonte Hester

Have you been pre-qualified for Financing? That would be the next step prior to looking at properties. This way you will know what purchase price you can go up to and be ready to make an offer.