All Forum Posts by: Jerry Padilla

@CJ M.

Loan sizes are credit score are big determining factors on rates as well.

@Erik B.

How is the contractor company held or titled? Are you 100% owner of the company?

If the property was purchased by an LLC and you are the majority owner of the LLC - not DBA than this should work and count towards the 6 month ownership requirement for an LLC, with conventional to then transfer title to your personal name at closing.

Product Overview

To be used on Conventional loans for either required or optional repairs.

• Repairs MUST be permanently attached to the property and add value.
• May not be structural - exceptions are roofing and minor foundation repairs
• MOBILE/MANUFACTURED HOMES are now allowed with restrictions & Maximum repairs are limited to the lessor of $35k or 10% of appraised value + financed renovation fee's

Primary Homes

-1-4 Units

-620 FICO Minimum (660 High Balance)

-95% LTV 1 Unit

-80% LTV 2 Unit

-75% LTV 3-4 Unit

Second Homes and Investment Properties (MINIMUM LOAN AMOUNT- $30K)

-620 FICO Minimum (660 High Balance on Second Home only)

-1 Unit - 80% LTV Purchase Only (75% LTV Refinance)

-2-4 Unit Investment Properties now eligible (75% LTV purchase/refinance). Standard Conforming Loan amounts only, NO High Balance.

- Second Homes and Investment Properties are limited to 4 financed properties (Including Primary Residence) No Limit for Primary Residence.

- No Cash Out Allowed.

Reserve Requirements

• Second home - minimum of 2 months
• Primary and investment property - 2-4 unit properties require a minimum of 6 months reserves

Allowable Repairs or Renovations

• Repairs/improvements must be permanently attached to property and add value
• Cosmetic repairs only
  • "Built-in" kitchen appliances

Conversions:

-Conversion of 2-unit to 1-units

-Conversion of 1-unit to 2-unit by exception only. Borrower must have prior landlord experience or qualify without rental income

Renovation Cost Limits

• Up to $35,000 in repairs/improvements
  • This includes the 10% contingency reserve
  • Loan amount calculation is Sales Price + Bid + Contingency Reserve ONLY
    • Renovation fees CANNOT be rolled into the loan amount unless it is a REFINANCE and LTV permits.

Note: If cost of renovations exceeds 35k, the Borrower/Seller is NOT allowed to pay the difference at closing from their own funds. If maximum amount is exceeded use HomeStyle Renovation program.

Contingency Reserve

A contingency reserve equal to 10% of the total costs of the repairs/improvements must be established and funded for all mortgages to cover required unforeseen repairs or deficiencies that are discovered during the renovation.

Contractor Validation

• Contractor is selected by the borrower and approved by the lender
• Contractor validation will be completed by the Renovation Department
• Maximum of three (3) contractors
• General Contractor is preferred but not required
• Follow state and local requirements for licensing of contractor(s). If a general contractor is not licensed for work that requires a license (i.e. plumbing, electrical, HVAC, etc.) obtain:
• proof of the general contractor's liability insurance coverage of at least 2 times the total bid, OR
• the license of the sub-contractor completing the work.
• “Do-It-Yourself” Projects are NOT acceptable even if the Borrower is a licensed contractor.
• Contractor on the project CANNOT be one of the following. (NO EXCEPTIONS):
  • Borrower
  • Borrower's employer
  • Members of Borrower's family
  • Seller
  • Realtor involved in transaction
  • Loan Officer involved in transaction

TEXAS PROPERTIES ONLY - It is important to remind the borrower that their contractor(s) will be required to attend closing

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, you are required to have 2% of all unpaid principle balances.

If you have 5-6 financed properties, you are required to have 4% of all unpaid principle balances.

If you have 7-10 financed properties, you are required to have 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. 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.

FHA has a limit of 49% commercial and 51% residential maximum. What is the square footage of the 2 area's?

@Bradley Kesselman

As Chris stated you are only required to put down 15% for a SFR. Less than 20% down you will be required to pay mortgage insurance.

Program Overview

• No personal income used to qualify
• Qualification based on property cash flow
• 2 years seasoning for foreclosure, short sale, bankruptcy or deed-in-lieu
• Credit scores down to 660
• Rates starting in the 6’s
• Up to 80% LTV
• No DTI restrictions
• Must have current mortgage
• 1-4 units and condos
• No limit on number of properties financed (5 loans or $3,000,000 in aggregate with this program)
• Minimum Loan Amount -$100,000
• Loans up to $1.5 million
• Seller concessions to 2%
• 7/1 ARM

Eligible Loan Purposes:

• Purchase
• Rate/Term Refinance
  • The loan-to-value will be based off of appraised value.
  • The property cannot be vacant.
• Cash-Out Refinance
• If the property has been owned for more than twelve (12) months, the LTV will be based off of the appraised value.
• If the property has been owned less than twelve (12) months the LTV will be based off the original purchase price.
• The borrower must be on title for a minimum of three (3) months.
• The property cannot be vacant at the time of closing.

Taxes and insurance escrows required for all loans.

PROGRAM AVAILABLE IN MANY STATES

@Vera B.

HELOC's are very difficult to find on investment properties. It looks like there are a few suggestions on here to try out.

Cash Out Refinances are common for investor friendly lenders. On an investment property, you are going to be looking at an LTV of 75% for a SFR and 70% for MFR properties.

@Marci Stein

For an investment property, you can cash out refinance 75% on a SFR and a 70% MFR. It is a great way to pull equity out on your properties with a low fixed rate.

@Ben Harhager

Since you are just starting a career, and were in high school, I would suggest submitting for a pre-approval directly to underwriting. It is called a TBD - to be determined. Worse case your denied, best case, they will take into consideration, you were in high school.