All Forum Posts by: Account Closed

@Brandon Foster do you have any quadplexes?

@Brandon Foster Indianapolis might be worth considering. This thread has a lot of good information.

Hello ladies & gents,

I've sent out an email regarding the Santa Monica BP meeting and Shawn's open house tomorrow. If you did not receive it, please shoot me a PM and I'll send the information to you. I will be creating an event for our South Los Angeles BP meeting under Brandon's account (apparently you have to have a pro account to create the events) so keep your eyes peeled for that notice. Please let me know if you need anything and have a great weekend!

After the financial crisis of 2008 destroyed the Detroit real estate market, it was the real estate investors who purchased neglected and abandoned homes and revitalized them to livable conditions. This began to increase and stabilize home values as well as provide more rental supply to the markets. When there is more supply to an area, RE & rent prices also stabilize because you're creating an equilibrium in an area that might have very tight demand. 

I'm assuming (assuming is the key word) that RE investors/developers will do the same in Houston and any disaster-struck area. Most individuals will not know how to deal with massive foundation/mold/etc damage to their homes and I don't know if they want to spend the money to rejuvenate their home back to a functioning condition. if the home-owners didn't have flood insurance and they choose to walk away from their houses then the banks and city have an issue on their hands because there will be a surplus of damaged homes that can fester mold and other grossness that few will want to put money towards. If people leave damaged homes to seek other rental units, then the rental market will become very tight and the rental prices will jump until the lost homes/units are replaced. I think RE investors are the ones who can truly help in this situation because they bring the knowledge and funds to help fix these properties and neighborhoods and they'll (hopefully) turn the damaged homes into a livable property again.  As Brandon and Josh have said many times, RE Investors are problem solvers and most of them are good people trying to provide ethical real estate related solutions. 

Hi John, I personally don't recommend you attempting to use FHA for non-primary residence property because you'll be crossing a fine line called "Fraud". However, you can purchase a property using FHA financing, move into the property aka househack, rehab the property as much as possible (in a manner that makes financial sense), and after 6-12 months you can refinance the property with a conventional loan. Once you get the property's LTV at 80% LTV or less, you can remove any PMI (or MIP) and begin the process to legally rent out your unit so you can move out of the property. Hope this helps.

@Dorian Jones
Yes, you're correct. VA Loans are for active service members, vets, and limited family members. USDA loans are for rural areas however their definition of rural vs. what we think of as rural can vary so I always suggest double checking to see if your property location is within their territory (I'm going to assume the LA proper is not included in USDA territory but of course I strongly recommend verifying all information ^_^).

The FHA loan is a great option and the underwriters will use current/prospective rents to help support the debt service coverage ratio. Let me know if you have any questions, I'm happy to help.

@Scott L. I think maybe there is probably some confusion on what is taking place during the underwriting process. 

I'm assuming (from my credit analyst experience) that the underwriter pulled Diane's credit report and/or a lien report and the report still reflects the debt/lien obligation of the property that Diane & her ex held jointly. If the credit report/lien report reflects Diane's debt/lien with her ex, but she says the debt was refinanced and she isn't liable, then the lender is within his rights to request support and documentation for what Diane is claiming. The lenders have to provide evidence to their managers, regulators, and auditors for why their analysis deviates from what the credit and lien reports state because those reports are typically the foundation of underwriting and calculating the debt service coverage ratio.  

Hi Ashley, Try asking your lenders to calculate the absolute highest amount you're qualified to borrow (assuming you're using a HELOC or LOC and not having to calculate for each individual property). Have them create a general qualification letter "Xx bank qualifies ashley for xx amount for xx property" And because they've already done the absolute highest borrowijg amount calculations, they'll just have to fill in the blanks. If this method doesn't work then try asking your lenders how to expedite the process for underwriting and providing pre-qual letters within a quick time frame. Hopefully this helps and best of luck on getting your flips!

Hey Dorian! I hope you're doing well and I'm so glad you asked this question because this would be a great topic for our next meeting. So to answer your question; there are a few ways to get funding for your property with a lower downpayment than the 20%-30%. 1. Get Government-guaranteed financing aka FHA, VA, USDA loans. I'm not as familiar with VA & usda loans but they also have low down payment options. FHA provides financing for SFR & 2-4 unit properties as long as you are occupying the property for a minimum amount of time (I believe it's 12 months but double check on that). The downpayment requirement is as little as 3.5% but also varies based on lender and other factors. So for the duplex, I only had to put down 3.5% on $400k property = $14,000. Better than 20%-30% down, right? You'll also need cash for closing costs; I estimate about an additional 1%-3% for closing costs (mine was about 2% of purchase price). FHA will require you to pay a monthly insurance premium until you get to 80% Loan to value. If you find a value-add property, then you can rehab the property, get the property to 80% LTV or less and refinance the property to a conventional loan to remove the monthly insurance premium. 2. Depending on your local neighborhood of interest/location of property, you can qualify for low-downpayment loans at community development financial institutions (CDFI). Check Broadway bank and OneUnited and other local banks to see if they participate in the program. Usually CDFI and small community banks provide more attainable loans for home purchases in the local neighborhoods. 3. More Consumer banks are offering mortgages with lower down payments (I heard Wells Fargo is promoting a 5% downpayment for primary residence home mortgages) so you can check with your bank to see if they'll offer similar options. However if you purchase a 2-4 unit, they may require a higher downpayment than a standard SFR. Also if you put less than 20% down, there is a good chance these consumer banks will also charge a mortgage insurance premium (PMI) until you get to an 80% LTV. Also, if you don't have all the downpayment + closing cost cash in a savings account but you have it in an IRA, you can use up to $10k from your account tax & penalty free for your home purchase. Let me know if you have more questions. I forgot to mention at the meeting that my professional background is in banking/finance 😑😑😑(that probably would've been helpful). Haha, I hope this helps!

@Scott L. Banks are required to maintain documentation to support their underwriting ability and decisions to provide to regulators and auditors when they are examined/audited. Again, there are different documents that probably can be provided however banks are usually trying to close loans as quickly as possible because delays affects their sources/uses funds schedule. 

From my experience in banking, lenders usually don't have enough time to dig into people's families' finances so I don't believe that this lender requested this information out of spite or nosiness. They just need to make sure their borrower does not have any additional debt to service outside of what is provided on the credit report and they need to verify debt amounts listed on the credit report because if there are any issues with Diane not being able to service the debt repayment it is the lender's *** and the bank's interest earnings & capital that is on the line. 

I also second what @Chris Mason said.