All Forum Posts by: Jerry Padilla

@Ryan Keenan

Yes, that will work. Anything that is on the HUD is paid at closing. Therefore, It requires you to put the money in an escrow account and the title company would have to agree to hold the money for the renovation period.

@Sean P. Garvey

Are you looking into purchasing SFR rentals or MFR rentals?

A SFR investment is going to require 15% down minimum for conventional and a MFR is going to require 25% down.

@Account Closed 

For a primary residence you can do as little as 20% down on a 3-4 unit with Freddie Mac (one of the two conventional routes) 

Home Possible is a low down payment program that may be an option with only 5% down if you are purchasing in a no income limit area, or meet the income limits within the area.

Here is some info on Home Possible; 

Advantages of Home Possible

• LTV of 97% on 1 unit & 95% on 2-4 units
• Minimum credit score of 620 1-2 units, 3-4 if greater than 20% down and 720 if less than 20% down on 3-4 units.
• PRIMARY Residence purchase only
• NOT Required to be a first time home buyer
• Locations considered a low income census tract - have no income restrictions

Restrictions of Home Possible

• 3-4 unit properties require a 720 credit score with less 20% down.
• Purchase transactions only - no cash out & no rate and term refinances allowed
• Income limits apply ONLY in certain locations. The borrowers qualifying income converted to annual income must not exceed 100% of the Area Median Income for the location of the subject property. This can be looked up on Freddie Mac’s website; http://www.freddiemac.com/homepossible/eligibility.html
• May NOT own other residential property
• MI insurance when greater than 80% LTV
• Max loan amount - conforming limits (super conforming allowed on SFR only)
• Non- occupying co-borrowers are not allowed with this program

@Christine Kankowski

Is this a primary or an investment property? 

@Shanese Francis

An FHA loan is for primary residence only and you can purchase up to a 4 unit property with only 3% down. You are required to live in one unit and can rent out the other 3. A conventional multi-family investment purchase will require 25% down.

@Account Closed

For investment properties with conventional you can go as high as 85% LTV for a SFR. A multi-family is going to be 75% LTV. Some lenders may overlays requiring lower LTV's.

Product Overview

• To be used on Conventional loans for either required or optional repairs.
• Repairs MUST be permanently attached to the property and add value.

NO MOBILE/MANUFACTURED HOMES

Primary Homes

-1-4 Units

-620 FICO Minimum (660 High Balance)

-95% LTV 1 Unit

-80% LTV 2 Unit

-75% LTV 3-4 Unit

Second Homes and Investment Properties

-620 FICO Minimum (660 High Balance on Second Home only)

-1 Unit - 80% LTV Purchase Only (75% LTV Refinance)

-2-4 Unit Investment Properties now eligible (75% LTV purchase/refinance). Standard Conforming Loan amounts only, NO High Balance.

- Limited to 4 financed properties (Including Primary Residence)

Allowable Repairs or Renovations

• Repairs/improvements must be permanently attached to property and add value
• Cosmetic repairs only
  • "Built-in" kitchen appliances

Conversions:

-Conversion of 2-unit to 1-units

-Conversion of 1-unit to 2-unit by exception only. Borrower must have prior landlord experience or qualify without rental income

Renovation Cost Limits

• Up to $35,000 in repairs/improvements
  • This includes the 10% contingency reserve
  • Loan amount calculation is Sales Price + Bid + Contingency Reserve ONLY
    • Renovation fees CANNOT be rolled into the loan amount unless it is a REFINANCE and LTV permits.

Note: If cost of renovations exceeds 35k, the Borrower/Seller is NOT allowed to pay the difference at closing from their own funds. If maximum amount is exceeded use HomeStyle Renovation program.

Contingency Reserve

A contingency reserve equal to 10% of the total costs of the repairs/improvements must be established and funded for all mortgages to cover required unforeseen repairs or deficiencies that are discovered during the renovation.

Contractor Validation

• Contractor is selected by the borrower and approved by the lender
• Contractor validation will be completed by the Renovation Department
• Maximum of three (3) contractors
• General Contractor is preferred but not required
• Follow state and local requirements for licensing of contractor(s). If a general contractor is not licensed for work that requires a license (i.e. plumbing, electrical, HVAC, etc.) obtain:
• proof of the general contractor's liability insurance coverage of at least 2 times the total bid, OR
• the license of the sub-contractor completing the work.
• “Do-It-Yourself” Projects are NOT acceptable even if the Borrower is a licensed contractor.
• Contractor on the project CANNOT be one of the following. (NO EXCEPTIONS):
  • Borrower
  • Borrower's employer
  • Members of Borrower's family
  • Seller
  • Realtor involved in transaction
  • Loan Officer involved in transaction

TEXAS PROPERTIES ONLY - It is important to remind the borrower that their contractor(s) will be required to attend closing

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 of the 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

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

• 95% for 1 unit
• 80% LTV for 2-4 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;

• SFR is 80-85% & 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.

Comments below are appreciated!

This information is accurate as of the time of posting. Please also verify the accuracy of this information at the time you are considering these options as guidelines change. 

@Ryan Keenan

You can recoup your initial investment (what is on your HUD), plus prepaids and closing costs prior to 6 months.

You can also start the cash out refinance process prior to 6 months, and tthen close at 6 months if you were interested in recouping more than that. This is a conventional guideline. 

@Ryan Keenan

Some lenders have overlays (more strict criteria than Fannie Mae and Freddie Mac - who set the conventional guidelines) 

Fannie Mae allows you to cash out if you have up to 10 financed properties. Freddie only goes up to only 6. 

Portfolio lenders will go above the 10 - but typically have higher rates so it is best to try and go conventional on the first 10 properties.