All Forum Posts by: Jerry Padilla

@Tony Velez

15% down is required for a SFR investment and 25% down for a MFR investment - up to 10 mortgaged properties are the most recent conventional guidelines for purchases. The reserves requirement you posted, is a previous guideline and may be an overlay for your current lender. You always need 6 months reserves on subject and here are the current required reserves:

Cash Reserves Required For Other Properties Owned by Investor;

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.

For 2017....

FHA Basic standard mortgage limits are:
Single - $275,665

Duplex - $352,950

Triplex - $426,625

Fourplex - $530,150

Conforming FHA Basic High Cost area limits are:

Single - $636,150

Duplex - $814,500

Triplex - $984,425

Fourplex - $1,223,475

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

Honolulu; Kalawao, Maui; Kauai;

1 unit - $721,150 1 unit - $657,800 1 unit - $713,000

2 unit - $723,050 2 unit - $842,100 2 unit - $912,750

3 unit - $1,115,800 3 unit - $1,017,900 3 unit - $1,103,350

4 unit - $1,386,650 4 unit - $1,265,000 4 unit - $1,371,150

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.

2017 FHA Mortgage Loan Limits From Floor -Ceiling

2017 Cities & Counties at Ceiling Limit

FHA Mortgage Limit Look Up For 2017

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

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.

@Ryan Green

The only concern I see is the comps. Hopefully your agent can find comps for you. If you are going the route of financing, an appraiser will have to find comps to determine the value of the property, and the market rent. 

@Tony Velez

If you have the equity built up, I would suggest refinancing. MIP doesn't fall off and is for the life of the loan, where PMI falls off. If you have at least an LTV of 80% you won't even need to pay mortgage insurance. Is your primary a SFR or a MFR?

A SFR only needs an LTV of 95%

A duplex is 80-85%

3-4 units are 75-80% LTV

These are depending on if you qualify Freddie Mac or Fannie Mae. 

@Christopher McIntosh

I don't lend in Alaska, so I can't help you with that aspect, but to get any conventional lending you would need to find a house that is in livable condition........ and just need cosmetic repairs. I am guessing you are looking at foreclosure or rehab properties? If there are structure issues, and "damaged" areas, you would have to go with a rehab loan. There are few lenders that offer them and your lender just may not offer rehab loans. You may want to search for local investor type loans or rehab loans. Call around.

If you want a house that you can just increase in value and to live in, I would look at houses in general that are very dated..... but still maintained to livable condition. I hope this helps! 

Recent changes to CASH OUT Financing;

- Cash out financing is available on 1-10 mortgages properties - (no longer a limit of 6 mortgages properties) 

- Investment properties have the same LTV on properties 1-10 mortgages properties. 75% for a SFR and 70% for a MFR. - Over 6 mortgaged properties, still require a 720 credit score - (previously at 7 mortgaged properties, the required LTV dropped another 5%) 

- 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 exactly what it sounds like. It is when you refinance your property and pull equity out of a property. The mortgage can either be paid off free and clear or can have enough equity in the property to make it worth refinancing and pulling equity out. Cash out refinances are available on primary 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.
• PROPERTIES LISTED FOR SALE
  For a rate and term refinance transaction, the borrower must evidence that the listing has been cancelled, and must not have been listed for sale as of the date of the application.
  For a cash-out transaction, the borrower must provide evidence that the listing was cancelled at least six months prior to the date of application.

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.

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. 1. SFR mortgaged property #1-10 - 75% LTV
2. 2. 2-4 unit MFR mortgage #1-10 - 70% LTV
• 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.

Comments below are appreciated! 

@Christopher Reid

Thank you, for the response! I am glad to help. 

@Jake Campoli

I agree that it is a great idea. You can start out with an FHA and go up to 4 units. You can live for basically free as the rents will probably pay your mortgage from the other 3 units. There are some downfalls with FHA and the mortgage premiums are for life. Once you build up equity in the property, you could refinance into a conventional mortgage.

@Latasha Shipman

I just wanted to add for the BRRR strategy to pull cash out on the appraised value you have to wait to close until after6 months. Prior to 6 months you are subject to a maximum of the purchase price and that is only if you paid cash for the property.

@Ashley Watkins

Why not a lower down payment? If it is a SFR, or an approved condo, you can get in for 95% LTV, maybe better? is it your down payment that is preventing you from going higher, or is it DTI's?