All Forum Posts by: Jerry Padilla

Maximum Loan Limit Look up for your area can be found here;

Look Up Conforming Limits For Your Area!

• Current appraised value is used to determine LTV
• Property must not be for sale, and must be taken off the market on or before the disbursement date.
• A Rate & Term Refinance can be used to pay off existing unpaid principal balances on the subject property, closing costs, prepaids, and points.
• No seasoning requirement.

Freddie Mac and Fannie Mae are both conventional lenders. They each have their own set of guidelines to be followed. There are investor friendly lenders that are able to specifically follow just one set of guidelines below. Below are the required LTV for Rate and Term Refinances.

Freddie Mac - min credit score : 620 - up to 6 mortgaged properties

Fannie Mae - min credit score: 620 - up to 6 mortgaged properties

Min credit score: 720 - 7-10 mortgaged properties & minimum loan amount of $50k at property 7 and above.

THESE ARE FOR MORTGAGED Properties 1-6; For Freddie Mac, a Rate and Term Refinance for a Primary Residence;

• 95% for 1 unit
• 85% for 2 unit
• 80% LTV for 3-4 units

THESE ARE FOR MORTGAGED Properties 1-4; For Fannie Mae, a Rate and Term Refinance for a Primary Residence;

• 1 unit - 95%
• 2 unit - 85%
• 3-4 unit is 75%

THESE ARE FOR MORTGAGED Properties 1-6; For Freddie Mac, a Rate and Term Refinance for an Investment Residence;

• 80 - 85% for 1 unit and 75% for 2-4 Units..... Up to 6 mortgaged properties allowed.

THESE ARE FOR MORTGAGED Properties 1-10; For Fannie Mae, a Rate and Term Refinance for a Investment Residence;

75% for 1-4 Units

Fannie Mae Guideline for Rate & Term, Mortgaged Property 1-6.

Fannie Mae Guideline for Rate & Term, Mortgaged Property 7-10.

Freddie Mac Guideline for Rate & Term.

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.

Acceptable Sources of Reserves; Cash and assets that are liquid or near liquid

• Checking or savings accounts
• Investments in stocks, bonds, mutual funds, certificates of deposit, money markets funds and trust accounts
• The amount vested in retirement savings accounts
• Cash value of a vested life insurance policy

  Certain assets must be “discounted” when used for reserves. Terms and conditions of liquidation may be required depending on the asset used for reserves.

  Assets Requiring Liquidation
  The following may be counted as cash assets at 100% of verified liquidated amounts:

  • Cash value of life insurance
  • Publically traded stocks
  • Bonds
  • Mutual Funds
  • U.S. Government Securities
  • Savings Bonds
  • Retirement Funds
• Gift Funds - Primary Residence and Second Home ONLY

@Chris Bisaillon

You can find several lenders in the forums as well that are experienced working with investors. Whoever you decide to go with I would make sure their main source of business was is working with investors. I say this because investor loan guidelines are different from primary home purchasing. There are factors like rental income calculations, cashing out and different strategies that experienced loan officers working with investors are more aware of.

@Kenneth Crosby

Welcome to BP! The BRRR strategy is great! Are you looking to buy a multi-family or SFR? I agree with others that it isn't necessarily the area, but the house. The market is hot here so if you do find a property, you need to take a look at it right away. Houses have been getting multiple offers the first day they go on the market when prices well! Let me know if you need an agent or have any questions on financing as well!

@Beverly Anderson

I have to completely agree with every other post. There is no need to get any other investors involved in a house hack and you should be looking at Multi-families. I know some really great agents that I can refer you to if need be. Have you been pre-qualified? What purchase price can you go up to? If you are going with a multi-family, you should be able to increase your max  limit and count the rental income on the other units at 75% to help you qualify. The market is competitive here!

@Nicholas J. Sciamanda

FHA is great for the low down payment as low as 3.5% down. But costs can be higher with this due to the upfront Mortgage insurance premium and then the annual mortgage insurance that doesn't go away.

Home Possible is another option for only 5% down, but you have to either meet the income restrictions or purchase in a no income restricted area. Also they now limit you to only having two properties plus subject at the time of purchase.

Conventional financing for an owner occupied duplex only requires 15% down. Investments that are 2-4 units require 25% down.

There are a lot of things to take into consideration for you to determine which route works best for you to accomplish your goals.

If you have the money saved to put down on the other properties or can save enough in time than put more down on this purchase?

I would look at closing costs and rates as well as qualifications comparing these types of loans for your first purchase and see what you feel most comfortable with.

@Victoria Dorsey

It sounds like you need to figure out a way to get your name off of the car........

Can he take out a personal loan or some other type of credit to pay off the car?

@Joseph Novicky

You would have to go with a portfolio lender that allows non-warrantable condos.

FHA and conventional products will not allow financing on these types of condos.

THINKING OF USING THE BRRR METHOD?

This method of financing works best when you find under valued or wholesale property that you can force appreciation by doing some renovations or updates to the property.

This method isn't best used on property that you purchase at retail value. You are better off using conventional purchase financing for this transaction.

Recent changes to CASH OUT Financing;

- Conforming limits increased in 2019 across in all states! 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 a refinance of your primary or investment property that allows you to pull equity up to the required LTV limits. The mortgage can either be paid off free and clear or can have a low enough balance on the current mortgage versus the value, to make it worth pulling out the equity in the property. Cash out refinances are available on primary, second homes 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, and are subject to a minimum loan amount of $50k!
• PROPERTIES LISTED FOR SALE - Must be taken off of the market prior to disbursement date of the new mortgage.

Cash Reserves Required For Other Properties Owned by Investor, if doing a cash out on investment property;

Cash Reserve Requirements;

6 months PITI is required on subject property.

If you have 1-4 financed properties, - 2% of all upaid principle balances

If you have 5-6 financed properties, - 4% of all upaid priciple balances

If you have 7-10 financed properties, - 6% of all upaid priciple balances

Money must be in account for 60 or sourced! A HELOC can be used as a down payment, but not as reserves. 

Want to use Delayed Financing & Cash Out at a Faster Rate? Click Here to Learn More!

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. Delayed financing is 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).
• CASH OUT FINANCING AND DELAYED FINANCING HAVE THE SAME LTV REQUIREMENTS - BUT DELAYED FINANCING IS SUBJECT TO A MAX OF PURCHASE PRICE PLUS CLOSING COSTS.
• 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.

Here are some links that you may find beneficial as well!

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.

@Chidi Dillibe

3-4 units can be tough with FHA in CA due to the high costs of properties and the self-sufficiency rule:

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. Plus the upfront mortgage insurance premium and annual mortgage insurance premium can be pretty high compared to other conventional financing routes. 

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%

I would take a look at the Home Possible program. If you don't meet the income restrictions, there are area's that have no income restrictions. The drawback to this loan is that Freddie Mac no longer allows rental income to be used without a 2 year rental history and this program only allows you to own 2 financed properties including the subject. 

Here is some helpful info. 

Income limits apply ONLY in certain locations. The borrowers qualifying income converted to annual income must not exceed 100% of the Area Median Income for the location of the subject property. This can be looked up on Freddie Mac’s website; Freddie Mac Home Possible Eligibility

@Brian Harker

I would take a look at where your current interest rate is versus the rate you would get for a refinance. If you can drop the rate lower than what you currently have, I would say go for it. Rates did recently just drop so hopefully you could get a better rate.