All Forum Posts by: Sasha Mohammed

Lima is not a bad option but there are better options out there for F&F. I would recommend you reach out to an experienced broker, specifically an investor-focused one, who has these relationships and can guide you toward the lender best suited for your needs. 

Which is a better strategy? Really, you just have to do the legwork to compare to determine which is going to be a better deal - your self-funded HELOC, or using Lima's capital (or another similar lender specializing in F&F).

Personally, I would be hesitant to utilize HELOCs just due to their adjustable nature. You're introducing more variability into an already variable market/ project type. That's not necessarily my preference for risk tolerance, but to each their own. 

That's a good point about credit cards. i think the differential is the HELOC is tied to the house, so has the ability to force a foreclosure on default. Credit cards don't.

Anyway, point was there may be an option out there. Let us know if you find one!

Depends how tiny. Private money is probably going to be your best bet in this day and age. 

I suspect in the future this will begin to be more commonplace, just not yet that i'm aware of. 

I would think they all do that if they are calculating DTI. It wouln't make sense not to, if you have access to the capital, they'd want to run numbers off a worst case scenario.

Alternatively, there are lenders that will do 2nds (not sure about HELOC specifically, but maybe a closed ended 2nd) using alternative qualification methods, or alternative doc methods (DSCR, Bank statement, P&L, etc.), maybe that could help?

i think more importantly is to see what the terms are on acceleration clauses. 

The reason the purpose of the loans are so important are to protect the lenders from violating different laws. I'll give you a super simplified example: if you buy a property and say you're NOT living in there, and then you do move into it; now the lender could be in violation of a litany of laws, including consumer protection laws, just based on what disclosures they did or didn't send out to you during the loan process, the rate, the fees, the terms, etc. Now they get in trouble because you told them one thing but did another. Not saying that's the case here, but there's a reason they are so particular about the use of funds. 

sounds like a step-down prepay, which is typical. But see if you can get an idea of reasons why the lender could call the note due (AKA "acceleration clause). If they find out you've changed your mind and started converting to residential, are they going to stick their hand out and immediately demand the entire balance from you?

Added: it will cost you a lot more to refi out of this once you close on it. It might be smarter to stop this loan and start a new loan for what you intend to do. I'd hate to see you throw good money after bad, with a 5% prepay in year 1, that's likely what would be happening, and that's not even taking into consideration the origination fees and transactional costs (title/escrow) you'd be paying AGAIN on the new transaction. 

Fannie/ Freddie would likely be your best bet due to loan size, however, they just moved to a 12 month cash-out seasoning requirement as of i think mid-March (for informational purposes for others reading). 

If you purchased about 4 months ago, you likely are grandfathered-in to the 6 month cash-out seasoning. 

It's a small one, so be prepared for a lot of "no's" just off the size alone. Private money is not a bad option either, and terms are whatever you can negotiate. Or, maybe you consider a cross-collateralization across your other properties as well?

i would argue this is not a one-size-fits all -- i think this is personal preference/ going to differ depending on your long term financial goals and strategy.

Personally, for how much the lump-sum is in cash, vs how much it impacts your monthly payment, i'd rather keep the cash. OR i'd rather put that same cash toward buying down my interest rate instead - THAT would likely have a bigger impact on my monthly payment than paying the up-front MIP in cash.

to each their own on this one, though. someone else would have different reasonings, like attempting to maximize equity, that it would make sense to pay off the up front up front... up front :)

I would recommend commercial brokerage, yes. Any joe blow mortgage broker may have AN option on commercial (anything 5+ units), but they may not have more than one option for lenders to be competitive in rate, and they may have never even closed one before to know the nuances of them. 

Loan Professional knowing how to analyze the deal for viability so you're not wasting time, and experience in that space.... both very important to success in closing. Especially on a purchase. 

Its determined by your VA disability status. Any loan professional should be able to request your Certificate of Eligibility, which will outline what your funding fee will be. I believe you could order it yourself as well through WebLGY if you have access to that?

what is your idea of "decent rates"?

I just priced out a 1 unit inv. prop at 80% LTV on a 12 month bank statement program I'm getting a 30 year fixed at 7.75% with somewhere between 1-3 points. this is with a 5 year PPP and a max 55% DTI. 24 month drops the rate to 7.625% today...

There are options out there, but "decent" is subjective these days :)