All Forum Posts by: Jerry Padilla

@Kyle Spinale

@Brent Coombs has a great explanation! If you have the money to put down, than go the route of conventional and save on the fee's. If you are looking at purchasing a multi-family residence. If you are just looking to purchase a SFR than conventional may be the better route. Conventional only requires 3% down for a first time home buyer and 5% down for a SFR primary residence purchase.

@Sean Yang

This is a great site to learn from others! @Kevin Fox is a local agent that may be able to help you as well. 

@Coleman Doughty Welcome to the site! I am glad to answer any questions you have on the refinance. I do business with @Kevin Fox in the San Diego market and he has found a lot of success for his clients........ He is making that market work! 

Yes, you could do everything you just stated. @Christopher Wedde

House hacking with an FHA mortgage can be difficult in high cost area's.

Competition is fierce. You have to get ahead of the game and think outside the box to get your offer accepted on the home you dream of. FHA Primary residence in a high cost area, can give you the greatest investment with the lowest down payment. (Only 3.5% down & up to 6% sellers concessions- closing costs paid by seller and negotiated on at time of negotiation.)

• When it comes to financing, typically clients get pre-approved with a loan officer. When a property is found they submit all of their required documentation along with the purchase offer.
• To get ahead of the game, you can get pre-approved directly through underwriting, giving you a stronger offer than any other financing client who has just been pre-qualified. You would submit all your required documentation ahead of time to the loan officer who would then pass this on to the underwriter, proceeding to get you cleared by underwriting prior to the offer, rather than after, for a specific maximum price. This will help you to close quicker, as you can bypass most of the underwriting system ahead of time.
• Offer a large deposit if offer accepted (maybe your 3.5% down along with an aggressive offer.) as you are now pre -approved versus being pre-qualified.

FHA Maximum financing for high cost areas....

FHA Basic High Cost area limits are:

Single - $625,500

Duplex - $800,775

Triplex - $967,950

Fourplex - $1,202,925

Links to FHA Financing;

2016 FHA Mortgage Loan Limits From Floor -Ceiling

Cities & Counties at Ceiling Limit

Cities & Counties Between Floor & Ceiling Limit

Locations Where FHA Increased Their Loan Limits For 2016

FHA Mortgage Limit Look Up For 2016

Keep in mind......when you are Purchasing a 3-4 unit multi-family with FHA - The full fair market rent determined by the appraiser must meet or exceed the mortgage payment. Also including a 25% vacancy factor.

You are also limited to a maximum of 7 units total including subject and investment properties!

These California cities are in the High Cost areas for 2015;

Los Angeles, Anaheim, Long Beach, San Jose, Sunnyvale, Santa Clara, San Francisco, Oakland, Hayward, Santa Barbara, Santa Maria, Santa Cruz, Watsonville

The CA counties are included in the high cost areas;

Alameda, Contra Costa, Los Angeles, Marin, Orange, San Benito, San Francisco, San Mateo, Santa Barbara, Santa Clara, Santa Cruz

These Colorado cities are in the High Cost areas for 2015;

Edwards, Glenwood Springs, Steamboat Springs, Breckinridge

The CO counties are included in the high cost areas;

Eagle, Garfield, Pitkin, Routt, San Miguel

Washington and Arlington - District of Columbia

These Hawaii cities are in the High Cost areas for 2015;

Kahului, Wailuku, Lahaina

The HI counties are included in the high cost areas;

Honolulu, Maui, Kalawao, Kauai

These Idaho cities are in the High Cost areas for 2015; Bailey, Hailey

The ID counties are included in the high cost areas; Blaine, Camas, Lincoln, Teton

The NY NJ PA counties are included in the high cost areas;

Bergen, Essex, Hudson, Hunterdon, Middlesex, Monmouth, Morris, Ocean, Passaic, Somerset, Sussex, Union, Bronx, Dutchess, Kings, Nassau, New York, Orange, Putnam, Queens, Richmond, Rockland, Suffolk, Westchester

These New York, New Jersey, Pennsylvania cities are in the High Cost areas for 2015;

Jersey City, Newark, New York

Elizabeth City in NC with counties of Camden, Pasquotank, Perquimans

In DC, VA, MD, WV - Washington, Arlington, and Alexandria

In MA - Vineyard Haven - Dukes and Nantucket

House Hacking With An FHA Mortgage - FHA Financing;

Maximum Financed Properties - 4 including subject!

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 having 7 units or less, including subject property and all other rental properties.

• 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.

@Joshua Morgan

The only issue I see is if there are no supported comps in the area, to support the number of units. They have to have comps to support an assessed value. 

@Jordan Charles 

You are required to live in the property for a year.

There is a great explanation below by VA, of how second tier entitlement is calculated and how purchasing a home in a higher cost area, may actually benefit you if you can find the right priced home. The calculations are done based on the maximum county loan limit, so increasing the county loan limit may open up a greater opportunity. There is still other criteria that must be met and you still would need to be approved, but it can open up opportunities, that may have not been there, if you obtained your first loan where there was a lower loan limit.

Explanation of Entitlement and Second Tier Entitlement

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 2016

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.

Higher Cost Area's Where You May See A Benefit

These California cities are in the High Cost areas for 2015;

Los Angeles, Anaheim, Long Beach, San Jose, Sunnyvale, Santa Clara, San Francisco, Oakland, Hayward, Santa Barbara, Santa Maria, Santa Cruz, Watsonville

The CA counties are included in the high cost areas;

Alameda, Contra Costa, Los Angeles, Marin, Orange, San Benito, San Francisco, San Mateo, Santa Barbara, Santa Clara, Santa Cruz

These Colorado cities are in the High Cost areas for 2015;

Edwards, Glenwood Springs, Steamboat Springs, Breckinridge

The CO counties are included in the high cost areas;

Eagle, Garfield, Pitkin, Routt, San Miguel

Washington and Arlington - District of Columbia

These Hawaii cities are in the High Cost areas for 2015;

Kahului, Wailuku, Lahaina

The HI counties are included in the high cost areas;

Honolulu, Maui, Kalawao, Kauai

These Idaho cities are in the High Cost areas for 2015; Bailey, Hailey

The ID counties are included in the high cost areas; Blaine, Camas, Lincoln, Teton

The NY NJ PA counties are included in the high cost areas;

Bergen, Essex, Hudson, Hunterdon, Middlesex, Monmouth, Morris, Ocean, Passaic, Somerset, Sussex, Union, Bronx, Dutchess, Kings, Nassau, New York, Orange, Putnam, Queens, Richmond, Rockland, Suffolk, Westchester

These New York, New Jersey, Pennsylvania cities are in the High Cost areas for 2015;

Jersey City, Newark, New York

Elizabeth City in NC with counties of Camden, Pasquotank, Perquimans

In DC, VA, MD, WV - Washington, Arlington, and Alexandria

In MA - Vineyard Haven - Dukes and Nantucket

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.

Experience is! 

When you are an investor looking for a lender there are many things you want to take into consideration and they may not be what you are thinking.........

1.) How many investors they work with and how well they know investor financing? Is it their primary client base?

This is also a concern when looking into a primary residence, as your investment properties will be taken into consideration as well. Investor financing is

Mortgage brokers many times have more overlays than an individual investor friendly lender. This becomes even more of a concern when looking to purchase investment properties.

An example............. Is many times mortgage brokers require 2 years of rental income to count rental income, when you really just need a mortgage history. You also need to look at the fee's with a mortgage broker compared to an individual bank.

2.) What will your relationship be after the loan closes? Will they be able to assist you with issues that may arise down the road? Will they be your resource in the future for more deals down the road?

A very important factor to think about is long term resources. You just took out a 15-30 year loan! If your loan is sold to different banks, customer service, Isn't always the best with some banks. If you develop a close relationship with an individual loan officer, than you can always go to them with questions and assistance with your loan, or on future loans.

3.) How well do they know their guidelines with investor financing? No loan officer is perfect, but they a hundreds of pages to know and understand. If they are not doing investment purchases on a regular basis than they is guaranteed to be issues arising, as the experience isn't there.

4.) What are their overlays when it comes to investment products or primary residence with a history of rental properties?

5.) The last concern should be rates...... You can have the best rates, but if the loan doesn't close than your gain is less.

The take away....... Make sure you choose a lender focusing on investors, with very little overlays. Then worry about the rates. 

States, we lend in;

Alabama, Arkansas, Arizona, California, Colorado, Connecticut, Delaware, District of Columbia, Florida, Georgia, Hawaii, Idaho, Illinois, Indiana, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Missouri, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Dakota, South Carolina, Tennessee, Texas, Utah, Vermont, Virginia, Washington, Wisconsin

Home Ready Program allows you to purchase your first home and use potential rental income without a mortgage history or experience and is income based in many situations.

Home Ready Program - First Time Home Buyer Program.

Fannie Mae's Home Ready Program

620 Minimum Credit Score

Required https://homeready-eligibility.fanniemae.com/homere... *********

Alabama, Arkansas, Arizona, California, Colorado, Connecticut, Delaware, District of Columbia, Florida, Georgia, Hawaii, Idaho, Illinois, Indiana, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Missouri, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Dakota, South Carolina, Tennessee, Texas, Utah, Vermont, Virginia, Washington, Wisconsin