All Forum Posts by: Jerry Padilla

@Mark Budd

You can upgrade your account to a pro for very little money and post this in the marketplace without getting it removed, along with any other advertisements. Have a great day!

@Jacqueline Segui

You would still need to prove that you would have an income to pay for the mortgage. If it is a business income than you need at least 2 tax returns. If it is income on the property only than you would have to be in line with your DTI's to qualify.

@Michael McDermott

To use delayed financing you would have to pay cash, or cash out you could just pull out added equity to the property. Every lender calculates income differently. Did they consider rental income? Do you have other properties with rental income? Was your loan officer experienced in working with investors? I am not saying that your DTI's are able to get you approved or not, but somethings can make or break your DTI's.

@Michael McDermott

Closing quickly is going to be difficult with the new TRID guidelines, which are nationwide and affect all lenders. It just came out a couple months ago and kinks are still being worked out. Do you have cash to purchase the entire property outright? You can always do delayed financing or cash out financing, if you purchase with cash. Are they considering rental income towards your income? 

@William Howley 

Great post and I completely agree! That is the route we took. We thought of transferring to an LLC after cash out refinancing, but don't see a need to with an umbrella policy. I am curious how many landlords actually get sued? We always make sure to have fresh paint in our properties with new tenants. I have only heard of lawsuits from lead paint.

@Engelo Rumora

You are crushing it! Great job! Glad to see all the success you are having! 

@Elizabeth Garcia

Welcome to the site! An FHA is a great way to start out, and with only 3.5% down. You can ask the seller to pay up to 6% towards closing costs (sellers concessions) you can purchase up to a Fourplex property.

Maximum Basic Standard Financing

Single - $271,050

Duplex - $347,000

Triplex - $419,425

Fourplex - $521,250

FHA Basic High Cost area limits are:

Single - $625,500

Duplex - $800,775

Triplex - $967,950

Fourplex - $1,202,925

Here is a site to look up Maximum financing with FHA;

https://entp.hud.gov/idapp/html/hicostlook.cfmMaximum Financed Properties

• The maximum of four financed properties includes the subject property.

Inducements to Purchase

• Certain expenses, paid by the seller and/or another interested third party, on behalf of the borrower, are considered "inducements to purchase" and result in a dollar for dollar reduction to the lesser of the sales price or appraised value of the property before applying the appropriate LTV factor. These expenses include:
• Contributions up to 6% of the sales 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.price
• Decorating allowances
• Repair allowances
• Moving costs
• Note—a dollar for dollar sales price reduction is also required for - Excess rent credit and gift funds not meeting FHA requirements Contributions exceeding the actual cost of prepaid expenses, discount points and other financing concessions

Credit Requirements

• Required is 600. FICOs below 620 have maximum DTI of 43% regardless of AUS approve/accept
• 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

• The borrower is required to make a minimum down payment into the transaction of at least 3.5% of the lesser of the appraised value of the property or the sales price. The borrower must have sufficient funds to cover borrower-paid closing costs and fees at the time of settlement. 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 a 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 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.

Livable Conditions

1. The property must demonstrate the following characteristics:

appropriate quality for household uses.

bathroom which includes a flushing toilet, lavatory/sink and a bathtub/shower.

devoted to public use and maintenance, or private streets protected by permanent recorded

Easements.

of the proposed mortgage.

as evidenced by recorded easements.

Up Front Mortgage Insurance Premium - For most of its mortgage insurance programs, FHA collects an:

• 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%

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

Rental income from a borrower’s primary single family residence (boarder income) is not acceptable for qualifying.

Rental Income from the subject property may be considered effective income if the subject property is a 2-4 unit dwelling. Required documentation is dependent upon the length of time the borrower has owned the property.

Rental Income – Subject Property For FHA Mortgage

�Fair Market Rent must be calculated using FNMA 1025/FHLMC 72 – Small Residential Income Property Appraisal Report; and Copies of existing or proposed leases, if available.

Calculating Effective Rental Income

� 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;

o Fair Market Rent reported by the appraiser; or

oThe 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

Calculating Effective Rental Income

� Any net rental income from the subject property must be added to the borrower’s qualifying gross monthly income after averaging the reported net rental income/loss reflected on Schedule E of the tax returns.

� When calculating the average net rental income/loss, any depreciation, mortgage interest, taxes, insurance, and HOA dues reflected for the subject property may be added back to the net income/loss.

� If the borrower has owned the subject property for less than 2 years, rental income/loss must be annualized for the length of time the property has been owned. 

Great Returns! 

@Gloria Lau

Welcome! 

BRRR is still a big subject here on B.P. You can still do your original thinking. If you start with private money, after the rehab you can rate and term anytime. There is no seasoning requirement. If you pay cash, you can take out up to the purchase price plus closing costs, in less than 6 months and appraised value after 6 months.

Here is some more info on BRRR Financing;

BRRR....... Buy Rent Rehab Refinance

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 mortgages #1-4. 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 #1-4 mortgages you can pull out up to 75% of the equity and a 2-4 units is up to 70% equity.
• On an investment property; If you have #5-10 mortgages you can only pull out money in the first 6 months (delayed financing) that you own the property, if you didn't originally get a mortgage on the property. As long as the value is there (on a SFR 70% LTV and 2-4 units 70% LTV) You can take out up to the purchase price plus closing costs on the property.
• RATE and TERM REFINANCE - PROPERTY 5-10 If you are willing to pay the fees and go through two closings.... You can take out private or hard money on free and clear properties #5-10 and do a rate and term refinance with conventional to pull money out on them.

• 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;
  
  • If the borrower has 1-4 mortgages, an additional two (2) months for every other SFR investment property and second home is required and additional six (6) months for every other 2-4 unit investment property and second home
  • If the borrower has 5-10 mortgages, An additional six (6) months for every other investment property and second home.

DELAYED FINANCING EXCEPTION

Delayed Financing Exception

A cash-out refinance within six (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 mortgage #1-4 - 75% LTV
2. 2. 2-4 unit MFR mortgage #1-4 70% LTV
3. 1. SFR mortgage #5-10 -70% LTV
4. 2. 2-4 unit MFR mortgage #5-10 - 65% 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.
    • Investor and second home borrowers with 5-10 properties are ineligible for cash-out refinance transactions unless all of the 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. 

@Alex Otten

Welcome to the site! It is a great site that will really help you get started and educate yourself. Glad to see you have already started investing purchasing a duplex. This will allow you to use 75% of the potential rental income on new purchases, since you have a mortgage history. I am always glad to answer any financing questions.

You can borrow for up to 10 conventional mortgages! You have the option of a 15, 20 or 30 year term.

For A Fixed Rate Purchase, Investment properties, Mortgages 1-4;

• A SFR requires a LTV of 85%
• A MFR requires a LTV of 75%
• A minimum credit score of 620

For A Fixed Rate Purchase, Investment properties, Mortgages 5-10;

• A SFR requires a LTV of 75%
• A MFR requires a LTV of 70%
• Minimum credit score of 720

Here are some answers to FAQ as well;

1. For all 1- to 4-unit investment property transactions, cash reserves equal to six (6) months PITI for the subject property are required.

Cash Reserves Required For Other Properties Owned by Investor;

• If the borrower has 1-4 mortgages, an additional two (2) months for every other SFR investment property and second home is required and additional six (6) months for every other 2-4 unit investment property and second home
• If the borrower has 5-10 mortgages, An additional six (6) months for every other investment property and second home.

2. Gift funds are not allowed on Investment property transactions.

3. Escrows for taxes and insurance are required unless otherwise approved by the underwriter.

4. Loans for investment properties are not eligible if the transaction includes non-arm’s length and/or at-interest characteristics

5. Investment property transactions cannot close in trust.

6. Maximum 2% sellers concessions is allowed!!

Maximum loan amounts for areas that are not considered high cost are; (high cost area financing applies to primary residence only)

1 unit - $417,000

2 unit - $533,850

3 unit - $645,300

4 unit - $801,950