All Forum Posts by: Jerry Padilla

@Baset S.

Using the BRRR method will work if they can find some under value properties to fix up and cash out refinance afterwards. They can purchase cash, and then get financing after the renovations based on current appraised value. Prior to 6 months there is a limitation of a maximum cash out of their initial investment.

@Morgan Wallace

In theory you can do this. Not sure it is going to work out as great as you hope. An appraiser is going to value the property significantly higher, with just cleaning up the property and no improvements made. They are going to see what you paid for the property very recently and typically they want to see improvements made to increase the value greatly. Plus, if the property isn't in livable condition, it will not qualify for conventional financing. A couple of other idea's:

Borrow from a HELOC on your primary if you have one and pay back later with the cash out refinance. Maybe home improvement loans or personal loans?

There are also Renovation loans if you have 4 or less financed properties, including the subject property. HomeStyle Renovation loan is one of these options. 

@Shaun Weekes

Thank You for the mention!

@Ryan C.

What are the purchase prices? There are minimum loan amounts with these products of at least $75k $100k loan amounts.  

@Matthew Hintzke

The HomeStyle Renovation loan is another option. Here is an overview with some more info. 

HomeStyle Renovation Loan 

Product Overview

• Combines home purchase or refinance (limited cash out) with home improvement financing in one loan with one closing
• Provides a convenient way for borrowers to make renovations, repairs, or improvements totaling up to 75% of the "as-completed" appraised value of the property with a first mortgage, rather than a second mortgage, HELOC, or other more costly financing method.
• Funds can be used for repairs or renovations that are permanently affixed and add value to the property.
• Primary residences as well as second homes and investment properties are eligible.
• Maximum of 4 financed properties including subject property, on second homes and investment properties. No limit on primary residences.
• NO MOBILE/MANUFACTURED HOMES

Required LTV's:

Primary Homes:

-1-4 Units

-620 FICO Minimum (660 High Balance)

-97% LTV 1 Unit with standard conforming only and buyer must be a first time home buyer, or a limited cash out refinance (high balance and buyers that are not considered a first time home buyer - 95% max LTV)

-85% LTV 2 Unit

-75% LTV 3-4 Unit

- Minimum 620 Credit score

-2-4 units require 6 months reserves

Second Homes

-1 Unit - 90% LTV

- 620 FICO Minimum

- Minimum 2 months reserves

Investment Properties:

-1 Unit - 85% LTV Purchase Only (75% LTV Limited Cash Out)

- 620 FICO Minimum

- Minimum 6 months reserves

- Minimum $50k loan amount

-2-4 Unit Investment Properties - NOT ALLOWED WITH THIS PRODUCT!

Allowable Repairs or Renovations

• Funds can be used for any repairs or renovations that are permanently affixed and add value to the property.
• Allowable repairs or renovations include, but are not limited to:
  • Installation of an “in-ground” swimming pool
    • Outdoor living areas are also eligible along with the pool installation
  • Subject property cannot be an unfinished model home or unfinished new construction.
  • Kitchen appliances (i.e. cooktop/ovens/stove/refrigerator/dishwasher) may be included only as built-in fixtures (attached to property - cannot be removed) in connection with a total kitchen renovation that includes new cabinetry and countertops. Eligibility will be determined by the Renovation Department on a case-by-case basis. Washers and dryers are not included - no exceptions.

-Properties requiring foundation or structural repairs require a foundation or structural report from a licensed engineer. Some examples include but are not limited to additional square footage being added, garage additions with new foundations, cracks or settlement.

@Edward L.

Keep in mind this is the loan amount, not the purchase amount. 

@Griffin Carson

Here are the rates of MIP for FHA;

Upfront 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 - 0.85%
• Greater than 15 years & less than 95% LTV - 0.80%
• Less than or = 15 years & Greater than 90% LTV - 0.7%
• Less than or = 15 years & less than 90% LTV - 0.45%

Annual Insurance Premium For Higher Balance Loan Amounts - Greater than $625k

• Greater than 15 years & greater than 95% LTV - 0.105%
• Greater than 15 years & less than or = to 95% LTV - 0.1%
• Less than or = to 15 years & greater than 90% LTV - 0.95%
• Less than or = 15 years & less than or = to 90% LTV - 0.7%
• Less than or = 15 years & less than or = to 78% LTV - 0.45%

@Griffin Carson

I am not too far from you in Rochester, NY!

FHA is great for a low down payment option, but can have some higher costs. There is an upfront mortgage insurance as well as an annual mortgage insurance and the mortgage insurance stays on for the life of the loan.

Once you have built up 80% equity, you can consider refinancing to conventional to eliminate mortgage insurance. 

@Steven Violano

 You will have to show a 2 year income history, as well as having a job in the same field for 2 years. Having just sold your business and starting fresh, it will be difficult to get financing for another 2 years. You will have to go the route of portfolio lending, which will have higher interest, but possibly more flexible with your income history. 

@Michael Lee Barton 

Great Buy! Now at 6 months you can cash out refinance and not only recoup your investment but get additional cash back!

@Jordan Black

Hard money and private money many times charge you interest only payments monthly, but it is all based on the terms they are offering. You will be paying this interest until the property is refinanced on whatever the balance is. 

So if you are doing a cash out refinance - where you are getting cash in your pocket (more than $2k) after closing costs and all liens are paid than you see an LTV of 75% for a SFR and 70% for a MFR with conventional. If you originally used financing, you can cash out at 6 months.

If you are not getting cash back in a refinance than the LTV is 80% for a SFR and 75% for a MFR for conventional. There are no seasoning requirements when you are not getting cash back and you can refinance at 2 months if you wanted to.

If you are still not able to meet the LTV - then yes, that difference as well as closing costs will be paid by you at closing.

There are also renovation loans for the first few properties you purchase - but you will be required to have down payments of 15% - 20% on a SFR and 25% on a MFR. These are conventional products as well, so the interest rates are much lower than hard money or private money.