All Forum Posts by: Latasha Griffin

@Brittany Burfict are you planning to live in the duplex and rent the other side out (this is known as "house hacking"). Or are you purchasing purely as an investment? They both require different loan types.

I'd suggest your first purchase be a house hack so you can remove your own housing expense from your liabilities and have more money to pay down personal debt or save for future purchases.

@Brittany Burfict No. Fundamentally, FHA loans are for borrowers who are purchasing a primary residence, not for investment purposes. However, if you agree to live in the property, you could qualify to use an FHA loan to purchase a 1-4 unit property (e.g. SFR, duplex, triplex or quadplex). To be eligible for an FHA loan, borrowers must meet the following basic lending guidelines: FICO score of 500 to 579 with 10% down or a FICO score of 580 or higher with 3.5% down. Your back-end debt ratio (mortgage, plus all monthly debt payments) should not exceed 43% of your gross monthly income. If there are tenants (with leases) in the property you're purchasing, you can usually use a portion (usually 75%) of the rental income in your debt to income calculation.

@Erik E. You can search on the HUD website for fha approved lenders in your state. Google "fha lender list search hud" to find them. Are you planning on doing any renovations? If so, that's a fha 203k loan product and the lender list gets even smaller. I have done quite a bit of research as I'm planning to use this loan product myself once I find the quadplex I want. Feel free to message me to talk through it.

@Luke Meeker I realize this may be too late to help, however, I am planning to use an FHA 203k product (very similar to Homestyle) to purchase and renovate a 4 unit in a few months. I have been interviewing GCs that were provided to me by the lenders I have also been interviewing. The GCs who were responsive, understood the 302k process and could support it financially, provided me with their license/insurance info and references are the ones I will invite to bid once I find a property I want to put under contract. So far, I have has good responses from a few. Private message me if you want their contact info.

@Kevin Romines technically you can refinance into a conventional loan immediately after the renovation escrow account is closed. However, it's not meaningful unless you've forced equity into the property through the renovation. The mortgage insurance will remain on a fha loan for the life of the loan, so you want to refi once the LTV is below 80%. Base this off a new appraisal after the renow escrow is closed. The appraisal for the 203k will be very conservative since it's based off of speculation of the ARV. A new appraisal after you've renovated the property and stabilized the rent roll will be higher, most likely.

The problem with the refinance is, most likely your lender has sold the loan off to another bank after closing the reno escrow (or immediately after closing the loan if you were working with a correspondent lender which I dont recommend on a 203k). If you don't service the loan for at least 2 or 3 months (make payments) your lender will get hit with a hefty penalty from the servicing lender. Talk to you lender to understand what this time period is and negotiate up front to have them lower your refi fees if you let him/her also do the refinance. This is a great way to build a strong relationship with your lender if your looking to do so.

@George Savaricas do you know the going section 8 market rental rate for a 2 and 3 bedroom voucher in that area? Maybe section 8 has some examples of the rental increase for the extra bedroom you could use as the argument for more rental income.

@Eric Jiwanmall if you're planning to use an fha loan anyway, you may be able to find a single family and convert it to a duplex or a duplex and convert it to a quad using the fha 203k loan product. Do your research on converting SFRs to duplexes. I've found some helpful info on YouTube.

@Justin Tyler It could be a challenge but I'm targeting sellers such as HUD, Fanie Mae, absentee owners, etc. Retail sellers on the MLS are not going to wait 60 days to close, in most cases. However, someone who owns an inhabitable property or a tired landlord might. HUD and Fannie Mae will prioritize consumers over investor buyers. I pulled a list of quads in the counties that I want to buy in, and am hoping to overlay that list with a list of evictions, code violations, in rem, and vacant properties to find sellers off market.

Also, I'm researching how to use the 203k to build quads using the existing foundation. As long as the existing foundation is in play, you could build an all new structure on top of it. I might be able to build vertically on a duplex structure to get a quad if the permitting allows it. Trying to think out of the box to find the right properties.

@Justin Tyler Your best bet if you're willing to occupy the property is a fha 203k loan. The loan is an FHA product that requires 3.5% down payment. You can buy a 1 - 4 unit property. The 203K loan allows you to finance the purchase of the property and the rehab budget up to 110% of the ARV. You'd want to refinance into a conventional loan after 6 months to drop the mortgage insurance, assuming you have more than 20% equity in the property as a result of the rehab. You'll need a 580 credit score or better to put 3.5% down. All other fha guidelines apply.

Only drawback is speed. It takes about 45-60 days to close a 203k loan and you need a lender that is approved in your state to do these loans and has experience with them. You'll also want your lender to be servicing this loan themselves through the reno project to prevent delays with the draw requests. The HUD website has a list of all the lenders who have closed on these loans and how many YTD. Google "fha 203k hud endorsements" to find it. Cross reference with a list of 203k approved lenders by Googling "hud lender list search" and choosing "Single Family and Multifamily Servicer-Originator" and "203(k) Rehabilitation Mortgage Insurance Program" as your search criteria. Also, your GC needs to be familiar with these kinds of loans and financially stable enough to wait a few weeks to get paid along with the draw schedule.

Not a super simple loan product but very good way to get your first investment property to house hack. I'm currently looking for a quadplex to do the same thing with.

@Tyrell D Bradshaw Conventional loans, except fha 203k, fannie mae homestyle and construction to perm loans, all require the property to be habitable. After quite a bit of research, I'd say for a new investor (like myself), the most accessible way to proceed is to find a 2-4 unit property that needs to be renovated, and use a fha 203k loan to finance the purchase and renovation budget with only 3.5% down. You can have the seller contribute up to 6% of the purchase price towards your closing costs. The total loan amount will be based on the ARV. You also will have to agree to live in the property for 12 months, however, you can refinance into a conventional loan after the reno is completed (wait 6 months to prevent your lender from being charged a huge penalty). Of course, you will need to force the equity into the property through the rehab in order to refinance right away.

Since you work with a wholesaler, you should know that you'd have to purchase the assignment from him/her with cash or hard money. Assignment fees are not allowed on the HUD when the buyer is using conventional financing (due to RESPA laws designed to protect consumers). A double closing may work if the county and your fha lender allow same day title recording of the deed transfer from the first closing. Not sure about that part.

However, you could use wholesaling marketing tactics to find a great deal on property that works for all of this. The key is having equity in the deal so you can refinance out of the fha product to remove the MIP and possibly pull some cash out. I'd focus on a four unit so you can get the most cash flow to cover your mortgage.