All Forum Posts by: Jerry Padilla

@Jay Hinrichs

What a great cause, you are supporting! 

@Bill Rich

With only 3% down conventional financing it was considered habitable when purchased.

Yes, you are correct only a duplex can be purchased with HomeStyle. I mispoke/wrote. We have a conventional product EZ-“C” Renovation that allows for investment multi-family purchases, and is similar to HomeStyle, except that it allows for multi-family investor purchases. I guess that is what I get for being on here at 2am and sleep deprived with a newborn who wouldn’t sleep. Lol

@Chase Harmon

You may want to research home improvement loans in your area. Doing a refinance is going to be costly if you plan to pay off 6 months or so down the road. If you have a lot of built up equity, you may want to do a cash out refinance at 6 months, when you won't be subject to a max of purchase price plus closing costs. A primary residence with a duplex will require and 75% LTV for a cash out at 6 months, if you wanted the cash out longer terms, or to pay off the loans, use the cash to purchase another property, etc.

@Lucas Hammer

To answer your second question, you would never be forced to refinance to an investment property if you decide to rent out your primary residence or second home etc. Things happen in life, but a good rule of thumb to go by is 1 year of keeping the property your primary or second home, for whatever documents you sign at closing.

@James Charlot

Here is some info that might help answer some of your questions on timing and LTV, as well as cash reserve requirements.

• The typical cash out financing is done after 6 months of owning the property, based on ARV (after repair value) 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

Cash Reserves Required For Other Properties Owned by Investor;

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.

@Shane W. Chapin

You could also do a HomeStyle Renovation Loan. This product allows for up to 4 financed properties including the subject property. You can use this Financing on a SFR investment property.

I am glad to answer any questions you have on this product, or send you more info. 

@Chase Harmon

Are you currently residing in the property, while renovating it? 

How long ago did you purchase the property? 

If your current address isn't this property you won't be able to use an FHA 203k. For HomeStyle if it is an investment property you most likely won't have enough equity, and meet reserve requirements with minimal in the bank.

@Chase Harmon

Are you currently residing in the property, while renovating it? 

How long ago did you purchase the property? 

If your current address isn't this property you won't be able to use an FHA 203k. For HomeStyle if it is an investment property you most likely won't have enough equity, and meet reserve requirements with minimal in the bank.

EZ-C Conventional Renovation Loan

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

@Randy Difani

Do you intend to occupy the property? 

If so when did you first purchase the previous primary?

You may run into issues with underwriting & getting approved for a second primary residence purchase as it can very well look like you are doing it to accrue rentals with low down payments, as mentioned above. 

FHA 203k is for primary residence only. To purchase a second primary residence you may need to prove why it is necessary to purchase the new primary to meet your family needs.

25% down is required for a multi-family residence investment purchase, but not necessary for an FHA mortgage.

FHA also has a few other guidelines that will have to be met.......

- You will be subject to a max of 7 units in the same area. So if you already own a 4 family nearby, you won’t qualify for another 4 family. 

-A 3-4 family property will also have to meet the self-sufficiency rule - 

***The maximum mortgage amount for the three (3) - and four (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 market rent is determined by the appraiser. Basically this is stating that what the market rents are need to equal the mortgage payment or exceed. The FHA house needs to pay for itself as if the property was fully rented out, even though the buyer will be living in one of the units.***

I am glad to send you more info on an FHA 203K or on an investment renovation loan program, as well as answer any questions.