All Forum Posts by: Jerry Padilla

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.

Here are some of the locations with the highest density of Veterans; Virginia Beach, Norfolk, Riverside, San Bernardino, San Diego, Carlsbad, Las Vegas, Dallas, San Antonio, Fort Worth, Arlington, Jacksonville, Richmond, Memphis, Tucson, Mesa, Albuquerque, Washington DC, Seattle, Arlington, Tampa, Baltimore, Houston, Atlanta, Ventura, Omaha, Bakersfield, Dayton, Columbia, Colorado Springs, Aurora, Oklahoma City, Honolulu, Denver, El Paso, Kansas City, Wichita, Louisville,Cleveland, Raleigh, Pittsburg, Tulsa, Minneapolis, Charleston are all area's with a high population of veterans.

We lend in every state!

@Shawn Ackerman

Absolutely! It was hard decision to make. I did it for more opportunity for my investors. It has been a great move with great support. I couldn't have asked for more in a company. We have very competitive rates now as well! Feel free to reach out to me when you get a chance. 

@Kevin Fox

Thank you for the mention! I am glad to answer any questions on the BRRR financing process.

Here at Prime Lending we offer 19 different rehab products for investors and primary owners, as well as second homes. 

EZ-C Conventional Renovation Loan is a product offered only by Prime Lending: 

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.

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

HOMESTYLE® 1:
To be used on conventional loans for both appraiser-required repairs and repairs the borrower wants done to the property. They can be utilized on second homes and investment properties. The repairs can be structural in nature or cosmetic, but they must be attached to the property and add value. The only time appliances (stove and dishwasher) may be included in the renovation is if there is a full kitchen remodel including cabinets and countertops and the appliances (stove and dishwasher) will need to be built in/attached to the property.

FHA 203K FULL:
This is a government-insured loan that allows you to buy a home that is in need of major repairs and/or renovations. The repairs can be structural and/or cosmetic in nature. The lender loans you money to buy a home and complete repairs in a single mortgage. This rehab loan offers fixed rates with only a 3.5% down payment required. The home must be your primary residence. The FHA 203K is also available for refinance transactions.

FHA 203K STREAMLINE [203K(s)]:
This is similar to the FHA 203K Full loan, but is more limited in its scope. The repairs can only be cosmetic in nature and are limited to a maximum of $35,000. Because the repair costs are smaller, there is less red tape to get through, hence the "streamline" name. These loans can also be used to refinance existing mortgages and rehab homes.

EZ CONVENTIONAL:
To be used on conventional loans for both appraiser-required repairs or repairs the borrower wants done to the property. The repairs must be non-structural in nature (no exceptions) and they must be attached to the property and add value.

HUD REO WITH REPAIR ESCROW:
To be used on HUD REO listings only where the appraiser has required MPR (minimum property requirement) type repairs.

MINIMUM PROPERTY / APPRAISER / UNDERWRITER REQUIRED REPAIRS:
To be used on FHA financed loans where the appraiser or underwriter has required MPR (minimum property requirement) type repairs.

BUYER / SELLER FUNDED REPAIR ESCROW:
Can be used on an FHA or conventional loan. Can be used on a VA loan by exception only if the seller is funding the repairs. Repairs do not have to be appraiser-required but the appraisal must be subject to those repairs being completed.

POOL ESCROW:
Can be used on a conventional loan (finance or refinance) to include the cost of a new swimming pool.

USDA REPAIR ESCROW:
To be used on a USDA-financed loan where the appraiser has required MPR (minimum property requirement) type repairs. For designated rural properties, they are guaranteed by the Department of Agriculture. Benefits include financing up to 100% of the purchase price and no monthly mortgage insurance premium.

WEATHER-RELATED ESCROW:
Can be used on an FHA or conventional loan. These loans can also be used on a VA loan by exception only if the seller is funding the repairs. Repairs do not have to be appraiser-required but the appraisal must be subject to those repairs being completed.

JUMBO RENOVATION LOAN:
To be used on a jumbo renovation loan for either appraiser-required repairs or repairs the borrower wants done to the property. The repairs must be non-structural in nature (no exceptions) and they must be attached to the property and add value.

Feel free to reach out with any questions.

https://lo.primelending.com/jerry.padilla

We lend in all states: 

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Rhode Island
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@Dan Schwartz

If you wanted to refinance into your personal name, it would have to be at least 6 months from the purchase date. After that time, there is no waiting period. 

@Ben Piper

@Dan Schwartz

An LLC will put you into the commercial financing category. Terms and rates won't be as favorable as conventional, but Lima One I know does LLC financing.

@Shawn Ackerman Thank you for the mention! You were correct on most of it, but they will follow the money trail of how the property was purchased. It the funds were sourced for at least 2 months prior to the purchase than it would be considered a cash purchase. @George Gipson III

@Matt Motil  @Crystal Smith  

Thank you both for the mentions!

@Kristina Dodson Dupree

Not that I have ever heard of. Conventional requires 25% down on MFR. A SFR investment can be purchased with only 15% down.

@Jeff Sheraton

I don't know how many properties that you own, but why not cash out refinance each one as you need the money, if you have less than 10 properties? This way you could get a fixed interest rate and only finance each property as you needed it? With conventional, you will get the lowest rates and longest terms, most of the time. 

I haven't heard of a fixed rate LOC, only fixed rate equity loans, and I don't know of lenders that will do them on investment properties. Maybe you could find a commercial lender or a portfolio lender?