All Forum Posts by: Michael Cohen

You wouldn't be able to take cash out with a construction to permanent loan.  You could do a cash-out refinance 6 months or so after the loan closes.

Yes. If you are looking for a multi-unit property (2-4 units) with an FHA loan, you can use 75% of the fair market rent values (as determined by an appraiser) as qualifying income. The 25% "vacancy" is used to offset maintenance, fees, and vacancy.

However, you cannot use the rental income from the vacating property unless it's 100 miles away minimum, or other exceptions (enlarging family size, employer-forced move, etc.) so your income would have to cover your vacating property plus the new property (minus 75% of the rented units.)

The lender could demand full payment (i.e. the entire mortgage) be satisfied within 30 days if you do a quitclaim to an LLC. There are a lot of forum posts about it so I won't get into it, but it's a very real issue.

@Daniel Courant Both VA and FHA loans are intended as an owner-occupied primary residence loans, so there will be some issues.

For a VA loan, the Veteran has to occupy the property, so this wouldn't work for you. As @Cole A. mentioned, you could consider an FHA loan. FHA also is intended as owner-occupied, and can't be used strictly as an investment property. However, you and your daughter could both be on the mortgage, with you as a non-owner-occupied.

@Tom R. @Joe Splitrock 

I know this is off topic, but while it's technically possible to get an FHA loan with a score of 500, I've never heard of a lender that will do it. If a borrower has a score under 600, they most likely have other issues that prevent an FHA loan from being approved: recent bankruptcy, significant derogatories, consistent late payments, etc.

@Shawn Evans I am unfamiliar with those particular lenders (that isn't necessarily a negative; there are a lot of lenders out there) - the only thing to be careful with is that many lenders with so-called "down payment programs" have exorbitant closing costs, so ultimately you're paying the down payment anyway.

Originally posted by @Lakshay G.:

I am securing an off market deal in Anne Arundel County Maryland. Because it's my first deal, I think my lender is charging me high fees for settlement purposes. For example, appraisal fee is $650 and when I questioned him, he stated "investment properties usually cost more to appraise" which sounded pretty fake to me but I don't know any better as of current. My parents bought an expensive home last year and there was no wire transfer fee but he's charging me $40 for it. Underwriting fee - $575, Processing fee $495. Settlement Fee $950, Survey Fee $250. And what the heck is re-inspection fee (charging me $175) for? This lender already has put a hard hit on my credit score but if he's charging me too much $, I will leave him and find a new lender. This property is very close to Baltimore county.

Property price $110,000. Interest Rate 4.9%

Thank You.

He's correct; appraisals in MD are $475 for primary residences and $600 for investment properties. And as @Chris Mason mentioned, lenders are worried about being audited so if they're even mildly reputable, the charges are going to be reasonable. If you have concerns, however, change lenders. The "hard hit" is a misnomer - you're not going to get turned down by your next lender because of a mortgage inquiry. I won't rehash the credit conversation further, but it really does not make an impact.

Originally posted by @Lakshay G.:

wow this discussion turned into something more than I expected which is great! Thanks everyone. 

As we are on the topic of credit scores. I'd like to ask a question. I always pay my credit card every month no matter what. My employee told me that as long as you pay "minimum balance" every month and pay off the balance, the credit score won't take a damage hit. He said as long as you aren't late in making the minimum payment. I disagree with him as paying on time does effect your score positively BUT does paying it off in FULL every month make it any better?

@Tim Youse Incompletelybagtee with you and I actually am in same boat as you are but a lender won't say no to you at 795. Now if your score was 550 and dropped to 519. That's a different ball game. 

Thank you @Chris Mason  thanks everyone. 

Whether you're paying the minimum every month or paying the balance in full does not affect your credit scores. What does, is your credit utilization - that is, the ratio of the balance to available credit - at the time your credit was pulled. If you pay in full every single month, but the last time your credit card told the credit bureaus what your balance and available credit was you forgot to pay that month, you would have a high utilization and therefore a lower score. Your history of paying off every month would be irrelevant. Pay on time every month and keep your utilization low. There's no set percentage, but ideally under 30%.

We do have a grant of up to 3% of the purchase price, which helps with financing the down payment.Your income will still have to cover the monthly payment. Since you're essentially looking to "house hack," FHA loans allow for you to use 75% of the expected rental income from fair market rent as determined by an appraiser on the non-occupied units as qualifying income.

So if you were looking to purchase a triplex and fair market rent was $1,000 per unit, then you could use $1,500 per month as qualifying income. Calculated as such: one unit occupied by you, and two units @ 75% of $1,000 per month.

Both the FHA and USDA loans are intended to purchase primary residences, therefore, cannot be used to acquire land alone. The 203K loan is an FHA product that allows for the acquisition and rehab of a primary residence. What you're looking for is a construction to permanent loan, which roles the purchase of land, plus construction of a home into one loan. FHA does offer a C2P loan, however, very few lenders do them. AnnieMac is one of the lenders who do that I would recommend.