All Forum Posts by: Jerry Padilla

@Justin O'Malley

What about the HomeStyle Renovation Loan? Are you looking at SFR or MFR? A SFR for a first time home buyer only requires 3% down and there are not as many fee's as an FHA.

@Blake Ingram

I don’t think you are going to find a private lender that will allow you to borrow 100%. 

Especially if you are going to use this as a primary, you would be better off doing a renovation loan versus a private money loan. There is the FHA 203k as mentioned above which is 3.5% down. FHA does have more fee's - but is the best solution for a MFR with the least out of pocket for a down payment. Also, the Homestyle renovation loan requires 3% down for a first time home buyer - SFR and 5% down if someone is not a first time home buyer for a SFR. HomeStyle requires 85% LTV for a 2 unit and 75% for 3-4 units.

Let me know if you want more info on either of these financing options. 

@James R. Copeland

The increased loan limit is available now. They do typically go up every year. The new loan limits went active 4 days ago. 

The 2019 loan limit for a SFR is $484,350.

Here is a link to look up the current loan limits.

https://www.fhfa.gov/DataTools/Downloads/Pages/Conforming-Loan-Limits.aspx

Is this a primary residence for an investment? 

A primary residence is 80% LTV = $464k for an appraised value of $580k

And an investment is 75% LTV = $435k for an appraised value of $580.

Purchasing With A VA Loan Criteria

Service Requirements For Eligibility

Obtaining A Certificate of Eligibility

Explanation of Entitlement and Second Tier Entitlement

VA Loan Limits are the same as Conforming Loan Limits for 2017

ELIGIBLE PROPERTY TYPES

1 – 4-unit properties

Condominiums—per VA guidelines and must be on VA approved list.

INCOME

• In order to be considered for approval of a VA home loan, income stability is a mandatory requirement
• Veterans recently separated from the service must have a minimum 2 year work history in the same line of work that he/she did in the service. The veteran should be in his/her most recent job for at least 12 months.
• Rental Income *** Rental income verified as stable and reliable may be included in effective income. Must have prior experience managing rental units or other background involving both property maintenance and rental.
• Rental Income *** Multi Unit Property Securing the VA Loan (2-4 units) cash reserves totaling at least 6 months PITI
• 75% of verified Rental history, or the appraisers opinion of market rent
• Rental Income*** Property the applicant occupied prior to the new VA Loan, use the prospective rental income to offset the mortgage payment only It may only be used to offset the mortgage payment on the departed residence.
• If no rental income is needed to support PITI - no cash reserves needed!

MAXIMUM FINANCED PROPERTIES

The maximum number of financed properties that the borrower can have is 4. However, the borrower must still have remaining VA eligibility for a VA loan.

GIFTS

A gift letter, source of funds and evidence of transfer of gift funds is required.

MAXIMUM LTV

100% for Purchase transactions
100% for Refinance transactions
100% for IRRRL Refinance transactions

MAXIMUM LOAN AMOUNTS, MINIMUM FICO SCORE AND RESERVE REQUIREMENTS

• Base Loan Amount - Up to the applicable county loan limit for the subject property - including high cost counties

Minimum FICO - 600

Required Reserves - none

• If Base Loan Amount - Above County Loan Limit - $750,000

Minimum FICO - 640

Required Reserves - 2 Months PITI

• If Base Loan Amount - $750,001 - $1,000,000

Minimum FICO - 680

Required Reserves - 4 Months PITI

• If Base Loan Amount - $1,000,001 - $1,200,000

Minimum FICO - 720

Required Reserves - 6 Months PITI

OCCUPANCY

Owner-occupied, primary residences are allowed. Second homes or investment properties are not allowed.

RESERVE REQUIREMENTS
RESERVES – must be liquid, readily accessible funds (non - retirement ) Cash reserves are required under the following circumstances:

1. • If the borrower uses rental income to qualify and the subject property is 2-4 units, six (6) months cash reserves
   • If the borrower uses rental income from other rental property(s), three (3) months cash reserves must be documented.
   • Please refer to “Maximum Loan Amounts, Minimum FICO, and Reserve Requirements” section for any additional restrictions due to loan size.

SELLER CONCESSIONS

Up to 4% of the purchase price.

Interest Rate Reduction Refinance Loan for Veterans.

The VA Interest Rate Reduction Refinance Loan (IRRRL) lowers your interest rate by refinancing your existing VA loan. By reducing your interest rate, your monthly mortgage payment should decrease. You can also refinance an adjustable rate mortgage (ARM) into a fixed rate mortgage.

IRRRL Info

• No appraisal or credit underwriting package is required when applying for an IRRRL.
• An IRRRL may be done with "no money out of pocket" by including all costs in the new loan or by making the new loan at an interest rate high enough to enable the lender to pay the costs.
• When refinancing from an existing VA ARM loan to a fixed rate loan, the interest rate may increase.
• No CASH OUT with IRRRL
• 6 month mortgage history required.
• No credit underwriting is required as long as....... Existing loan must not be past due more than 30 days, or the payment doesn't increase by more than 20% if reducing term.
• Credit pulled with a required score of 600.
• May not extend term of the refinance more than 10 years from original term.

IRRRL Refinancing & Cash Out Refinancing A VA Loan

• Must have an existing lien to cash out
• There must be no late payments for the previous 12 months
• Typically allow 90% Value for Cash Out
• 100% Value of;
• Buying out spouse - verified with court order
• Consolidating existing debt & reducing monthly payments
• Payment of any property related liens
• Use for property improvement - requires contractor bid
• 100% value -$500 or less cash at closing to be given
• "Cash Out Letter" explaining the use of the funds.

Product Overview

• Combines home purchase or refinance (limited cash out) with home improvement financing in one loan with one closing.
• Provides a convenient way for borrowers to make renovations, repairs, or improvements totaling up to 25% of the "as-completed" appraised value of the property with a first mortgage, rather than a second mortgage, HELOC, or other more costly financing method.
• Funds can be used for repairs or renovations that are permanently affixed and add value to the property.
• Single Unit, Primary residence only
• NO MOBILE/MANUFACTURED HOMES
• Must be completed within 90 days of funding.
• Up to 25% of the as complete value (Including contingency).

Conforming High Balance loan limits available where applicable.

Allowable repairs to be done on the property.

• Repairs and final inspection completed lesser of 90 days or as approved by the Renovation department
• Maximum repairs 25% of the after complete value.
• Roof: repair or replacement (covering, underlayment)
• Gutters/downspouts: install/repair/replace
• Insulation: ceilings/walls/asbestos removal
• Siding/windows/doors
• Paint: interior/exterior/lead paint abatement
• Kitchen: all appliances/cabinets/ total
• Electrical: repair/replace/recondition all
• Plumbing: repair/replace/recondition all
• Repair/Replace HVAC or other systems
• Repairing or removing an in-ground swimming pool
• Installing or repairing fences, walkways and driveways
• Flooring/subflooring/tile/carpet/wood
• Termite treatment/damage repair
• Repairing or replacement of well and septic- *See appraisal section of the guidelines for specific requirements
• Weatherization items/repairs/ improvements

Foundation Repair

Repairs not allowed by the program.

• Repairs performed by the borrower
• No Detached Garages
• No Swimming Pool Installations. Pool Repairs are allowed.
• Improvements that do not conform to the surrounding neighborhood
• Any new construction including room additions.
• Landscaping or similar site amenity improvements.
• Rehabilitation activities that require more than two payments per specialized contractor.
• Major rehabilitation or major remodeling.
• Require plans or architectural exhibits.
• Results in work not starting within 30 days after loan closing.
• Borrower is unable to occupy at closing or within 30 days.
• Television antenna and satellite dishes.
• Additions or alterations for commercial use.
• SFR conversion to a 2 unit

Any structural repairs or renovations that are not foundation or roof repair.

Parties listed below are not eligible to perform the work:

• Borrower
• Family Member
• Borrowers Employer
• Seller
• Realtor

Any Interested party to the transaction

Maximum number of contractors: 3

2 Draws, 30% initial and 70% final.

Contingency Reserves

• A contingency reserve equal to 10% (or may be higher depending on scope of work) of the total costs of the repairs and renovation work must be established and funded for all mortgages to cover required unforeseen repairs or deficiencies that are discovered during the renovation.

20% contingency reserve required when property needs structural repairs, or where utilities are turned off.

@Anthony Villalobos

@Kevin Fox

Is an agent that you will want on your team. He is a very knowledgeable and motivated agent in San Diego. 

@Teri Feeney Styers

I agree! With clients that have little money to put down, or for renovations it is a great way to go. 

For more info on FHA Financing;

FHA Financing

FHA 203k Product Overview

LTV Requirements: Maximum of 110%

1-2 units allowed (3-4 units by exception only)

The Limited 203(k) may only be used for minor remodeling and non-structural repairs.

The Limited 203(k) does not require the use of a 203(k) Consultant, but a Consultant may be used.

There is no minimum rehabilitation cost.

Maximum number of contractors: 3

Repair Limits

• Renovation Total can be up to $35,000 in cosmetic repairs.
• This amount includes: 10% contingency reserve and all fees and costs listed in the fee section.
• Exceptions are not allowed to exceed the repair amount.
• Borrower is not allowed to fund overage.

Allowable Repairs

- Repairs and final inspection completed lesser of 180 days or as approved by the Renovation department

- Maximum repairs $35,000 (inclusive of all financed renovation fees). NO Exceptions.

- Roof: repair or replacement (covering, underlayment)

- Gutters/downspouts: install/repair/replace

- Insulation: ceilings/walls/asbestos removal

- Siding/windows/doors

- Paint: interior/exterior/lead paint abatement

- Kitchen: all appliances/cabinets/ total

- Electrical: repair/replace/recondition all

- Plumbing: repair/replace/recondition all

- Repair/Replace HVAC or other systems

- Repairing or removing an in-ground swimming pool

- Installing or repairing fences, walkways and driveways

- Flooring/subflooring/tile/carpet/wood

- Termite treatment/damage repair

- Repairing or replacement of well and septic- *See appraisal section of the guidelines for specific requirements

- Weatherization items/repairs/ improvements

Non-Allowable Repairs

- Structural or requiring engineers report or requiring blueprints

- Repairs performed by the borrower

- No Detached Garages

- No Swimming Pool Installations. Pool Repairs are allowed.

- Improvements that do not conform to the surrounding neighborhood

- Repair cost that exceeds $35,000. NO Exceptions.

- Any new construction including room additions.

- Landscaping or similar site amenity improvements.

- Any repair or improvement requiring a work schedule longer than six months.

- Rehabilitation activities that require more than two payments per specialized contractor.

- Major rehabilitation or major remodeling.

- Required repairs arising from the appraisal that Necessitate a “consultant” to develop a Specification of Repairs/Work Write-Up.”

- Require plans or architectural exhibits.

- Results in work not starting within 30 days after loan closing.

- Borrower is unable to occupy at closing or within 30 days.

- Television antenna and satellite dishes.

- Additions or alterations for commercial use.

- SFR conversion to a 2 unit

Contingency Reserve

- 10% of the cost of rehabilitation

- Properties where the utilities are turned off will require a 20% contingency.

Permits

- If permits are required to complete the improvements, you must have permits prior to any subsequent draws after settlement. No Exceptions

Borrower Acknowledgment

- Parties listed below are not eligible to perform the work:

- Borrower

- Family Member

- Borrowers Employer

- Seller

- Realtor

- Any Interested party to the transaction

A family member is not allowed to originate or be involved in the loan process

- Family member as defined below:

- Child (son, stepson, daughter, stepdaughter)

- Spouse

- Parent (includes step-parent or foster parent)

- Grandparent (includes step-grandparent or foster grandparent)

- Legally adopted son or daughter, including a child who is placed with the borrower by an authorized agency for legal adoption

- Foster child

- Brother/stepbrother

- Sister/stepsister

- Uncle

- Aunt

- In-laws

Fees

- Single Fee: $550

Conforming 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 limit https://entp.hud.gov/idapp/html/hicostlook.cfm

High Balance Loan Amounts

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

- Each county has its own individual area limit (refer to the following HUD website) https://entp.hud.gov/idapp/html/hicostlook.cfm

Upfront MIP

- 1.75% of the Base Loan Amount

Monthly MIP

For 2018....

FHA Basic standard mortgage limits are:
Single - $294,515

Duplex - $377,750

Triplex - $455,800

Fourplex - $566,425

Conforming FHA Basic High Cost area limits are:

Single - $679,650

Duplex - $870,225

Triplex - $1,051,875

Fourplex - $1,307,175

Maximum Conforming limits are below (If Your Area Qualifies, For Specialty Financing);

Alaska & Hawaii

1 unit - $1,019,475

2 unit - $1,305,375

3 unit - $1,577,800

4 unit - $1,960,750

House Hacking With An FHA Mortgage - FHA Financing;

Maximum Financed Properties - To qualify (Including investments) - 4 including subject!

This is an Owner Occupied Mortgage Product.

2018 FHA Mortgage Loan Limits From Floor -Ceiling

2018 Cities & Counties at Ceiling Limit

FHA Mortgage Limit Look Up For 2018

Inducements to Purchase

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

Credit Requirements & Derogatory Remarks

• Required is 600.
• Minimum of 2 trade lines are required
• No more than $1,000 in disputed collections
• Must be all on time payments in the past 12 months of mortgage history
• No more than $2,000 in collections ........ Medical bills are excluded.
• Minimum of 2 years from Chapter 7 or 13 bankruptcy discharge
• Minimum of 3 years from Preforeclosure, short sale, deed in lieu, foreclosure from discharge date or release date.

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. Down payment can not be borrowed, from any source.
• 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

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.

FHA also limits you to a total of 7 units including subject property and all other rental property.

• 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 - 0.8%
• Greater than 15 years & less than 95% LTV - 0.85%
• Less than or = 15 years & Grester than 90% LTV - 0.7%
• Less than or = 15 years & less than 90% LTV - 0.45%

Annual Insurance Premium For High Balance Loan Amounts

• Less than or = to $625,000 & less than or = to 95% LTV - 0.8%
• Less than or = to $625,000 & greater than 95% LTV - 0.85%
• Greater than $625,000 & less than or = to 95% LTV - 0.1%
• Greater than $625,000 & greater than 95% LTV - 0.105%

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 an FHA 203k loan refer to this link;

FHA 203k Financing

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.

@Matthew Mason Thank you for the mention!

@Tandi H. This pricing looks more along the lines of a primary residence versus investment. I would double check with your lender.