All Forum Posts by: Jon Puente

Hey Troy, 

Yes, you will still need a down payment in any situation. If you are buying a primary home using an FHA loan, you need 3.5% minimum. If Conventional, you need 5% down minimum.

Just make sure you get a lease agreement on your old home (to be rented) and the first month's security deposit.  They will not use the income if you don't have those lined up by closing.

Tons of people do this, and I also did the same thing earlier this year. 

Great Question!

Hey Eli, 

Conventional mortgages (Fannie or Freddie) are not assumable. But government loans such as FHA, VA, and USDA are assumable.

When you find a property you like, find out what type of loan is currently on it.  If its a government loan, you can ask if the seller would be open to an assumption.  All this means is that you take over the existing mortgage with the same lender but using your credit, income, and assets (the same way as you would obtaining a new mortgage). 

However, you will need to cover the equity gap.  For example, if the property is worth 300K and the current mortgage is 200K, you will assume the 200K but need the extra 100K to cover the gap. 

The best strategy to do an assumption is to have your documents in order to you can start the process right away.  Get your paystubs, W2's, bank statements, insurance, etc... lined up.  Assumptions take almost double the time as normal underwriting, so don't make the seller wait even more than they have to.

Great Question! 

Hey August, 

DSCR would be your next bet if you are wanting to buy another INV property. What I have found is that right around 2-4 properties, most people are tapped out on DTI and are unable to qualify using a conventional loan.

If you are wanting to buy a primary, make sure your Schedule E on tax returns shows adding back insurance, taxes, repairs, depreciation, etc... The goal would be that you show "X" amount of income (ex: $20,000 for the year) and then your expenses are just below that or right around that (ex: $22,000 for the year).  

When you add these back in, you can use 100% of that income to help lower DTI %. I am happy to show you what this looks like on my tax return if you want. Overall, very simple calculation.

Great Question!

Hey Mary,

Buy a house as a primary residence with 3% or 3.5% down using a conventional or FHA loan and then get a roommate to cover part of the payment.

Its really as easy as that! 

Hey Tom,

FHA loans have Upfront Mortgage Insurance that is 1.75% of the loan amount. They also have monthly mortgage insurance on the payment. You cannot get around this unless you change to a Conventional loan.

As for the 2% origination fee, that is most likely what your loan officer is making, which is not good nor bad, just depends on the situation.  I would look on your loan estimate to see if you are getting any lender credits (Section J) to help offset their 2% fee.  When I structure a loan, I try to give as much lender credits as possible to help the client lower closing costs.  

Your job is to find or ask about lender credits. 

Hey Jacqueline, 

Sounds like you are talking about a DSCR or Commercial Loan and vesting in your LLC. Pretty common practice here. DSCR loans do have slightly higher rates than conventional loans, but its not because of the LLC, its because of how they qualify the client (not using personal income).

Rates will decrease on ALL loans once rates actually decrease in general.  It's due to market data and inflation.  You used to be able to get rates in the 4-5% ranges, but now they are in the 7-8% range due to an increase in inflation.  

Pricing can also depend on if you have Prepayment Penalties (or not) and credit scores of the guarantors.

Great Question!

Hey Ralph,

Typically if you sell a property or any asset for a gain within 12 months, you pay capital gains tax at your tax rate.  If its longer than 12 months, it would be 15% long term capital gains tax.  

When you run a business however, you can write off a lot of materials, equipment, software, etc.. that can help reduce your tax bill.

If there is a cheat code to this, I am all ears!! 

Hey Cristal, 

Just move your property to an LLC. The lender wont give you anything that says the due on sale clause is not applicable.

The chances of them actually calling your note due is slim to none.   Just dont miss payments and you will be fine!  

(I am not an attorney and this is not legal advice)

Hey Keeya, 

There wont be a market crash, but may be some fluctuation. What you need is data on what rates/costs/terms you can get on DSCR and then base your decision on real figures. Right now it sounds like it's an emotional decision rather than factual.

Lastly, if you truly feel the market is going to crash, the only way to hedge against it is to do nothing, or buy in the best locations.  

Location, Location, Location. 

Hey Tom, 

Foreclosure will not be an issue if it is 4 years from discharge date on a conventional loan.  However, the self employment could (or could not) pose an issue depending on how much you pay yourself yearly and what you report on your tax returns.   A lot of lenders do want 2 years of self employment history, but sometimes you can get away with 1 year.   Long story short - it depends! lol

Great question!