All Forum Posts by: Luis Somoza

Quote from @Gedaliah Fineman:

I was informed of a new regulation requiring 12 months of seasoning in certain scenarios and wanted to find out if this would apply if the primary loan of an investment property was a hard money one. It seems to not apply to a HELOC. Please see below and thanks in advance!

Some non-qm lenders would be ok with less than 12 months seasoning. Best way to find out is contact a mortgage broker that works with lenders that offer these loans and is licensed in the state in question,

Using funds from the HELOC for the down payment will not be a problem. You may also need to show reserves available in your name.

DSCR loans will not require you to disclose any income or employment, but may require a larger down payment. A conventional loan can require a slight lower down payment but will require you to qualify from an income and asset perspective and that could be more difficult as self-employed borrowers usually have a harder time qualifying for a mortgage.

You could also look into a bank statement loan, but again, will need to show reserves after closing in your name mroe than likely, as funds held in a business name are not always accept by non-qm lenders.

One thing to keep in mind is investment property in the industry means a rental property, if it's not going to be a rental, then it's either a second home or primary residence. 

Don't rely on friends/family to keep an eye on the property for you. Hire professionals if that's the case, like a property manager if you're going to rent it out. 

I would start talking to a mortgage broker as early as you can about this so you are aware of the requirements to qualify for a loan, especially if you're relocating and changing jobs, and potentially the way you get paid which could complicate your purchase.

It sounds to me that you are paid via 1099, which means you are self-employed from our perspective. Depending on your employment requirements, you may be better off not changing jobs and buying first, especially if you're not required to work from a specific location. If you're W-2'd, your position could also be required to have a 2 year history as the income is variable (per diem), so again, having that discussion now with a few mortgage brokers may be a good idea.

If you change jobs and industries before buying, that could pose other challenges depending on how you're compensated, etc.

 The source of funds matter, a personal loan or say a cash advance on a credit card would be frowned upon. Gift funds could be frowned upon by many lenders, as well, as the borrower is not invested.

Funds from a pension/retirement plan are acceptable as they are the borrower's actual funds and considered having skin in the game

 Yes. 

Edit - your pension/401K provider may not allow this if they only allow it for a primary residence, though, so that could be an issue, but lenders would not have an issue with this.

It's not that simple. It's a much deeper discussion than that and without the understanding of how all of that applies, how you wrote it off, how it's calculated, etc.

It's not about refinancing, or purchasing, either. A mortgage transaction is the same regardless - you have credit, income, etc, that goes into the approval. Most SFR's when rented out show negative income on Schedule E due to the write off's, and without getting into a long explanation about how we calculate income in the mortgage industry, and other permutations about how you structured this from a business standpoint, you're asking the wrong question and trying to simplify a very complex question without understanding why it's an impossible question to answer without all the paperwork to review, and understanding what we're dealing with. I have been in mortgage lending for 25 years,

Not trying to be snarky, but that's reality.

If you filed a schedule C for it, it's treated one way, etc. There are way too many questions that we do not have the answers to right now, and you're asking the wrong question, which is why I mentioned to find a qualified mortgage broker to discuss this with. Since you're in Texas you may want to reach out to http://swiftmortgagelending.co... who can help you with the calculation of your income and determine what the best options are for you based on what your specific situation offers.

Eliot's answer is incomplete, and wrong. Conventional loans are not priced based on DTI, as there are no LLPA's for this from Fannie/Freddie. In the end, handle your taxes the best way you and your tax planner/advisor see fit. Manipulating them to get mortgages may lead to complications down the road. Further, you may be talking about your P&L, which from a tax perspective and loan perspective is meaningless, as what and how you file is what matters. Not all deductions are subtractions to income from a mortgage standpoint on your returns.

Again, speak with a qualified mortgage broker, or loan officer, so they can walk you through it. They may not even need the income from the rental to make the loan work for you, so this entire thread could be moot.

You can't make sure, because we don't have all the information, your full loan application, income documents, etc.

From the sounds of it, what your bank LO is telling you sounds correct; however, I wouldn't use a bank LO. Banks typically have extensive overlays over base mortgage guidelines, so I would recommend using a mortgage broker over a LO at a bank.

It's not quite that simple. His loan and rate likely include the compensation to the broker, whereas a loan at a lower rate wouldn't so it needs to get charged... so what are the origination fees?