All Forum Posts by: Mitch Davidson

@Andrew Aladjadjian, agreed, but not about FHA. FHA is harder to qualify for when your pay is "variable" (i.e., the term used if Walter is W-2) or 1099. And if @Walter Jimenez's credit scores are pretty decent, Conventional will be cheaper regarding monthly payment, and will only require 3% (FTHB) or 5% for down payment. That said, if the property is a 2-4 unit then FHA will definitely be better, as the down payment will remain 3.5% while Conventional's limit will increase to 15% or 20% depending on unit count.

@Walter Jimenez. I can't help you with a loan in CA, but I have worked loans for travel nurses quite often. And my wife and mother have done some travel nursing as well. If you're working for an agency as a W-2, we could use the income for a conventional loan if you have been working as a travel nurse in a W-2 capacity for the last 24+ months. We would have to do a monthly pay average for 2023 YTD, as well as averages for 2022 and 2021. Then we would use the worst-case average of YTD and the 2-year history. Meaning, whichever combined average is lower, YTD, YTD&2022, or YTD&2022&2021. If you're 1099 instead, we could use the income for a conventional loan once you have a 2-year history, meaning we see something on Schedule C for your 2021 and 2022 returns (or 2020 and 2021 if you have a 2022 filing extension and close on the new home before the extension expires). For the 1099 income we would use the net profit (line 31) on Schedule C in your most recent 2 tax returns, add back a few write-offs like depreciation and business mileage, divide by 12 for each year, and then use the most recent one year's average or the average of the 2 years, whichever is lower. Hope this helps.

Until recently, the seller could pay a deposit to a contractor for work to be performed after closing, by way of the closing proceeds, and most of us wouldn't have to ask any questions when we saw a line item for the payment on the seller side of the CD. This approach was effectively a way for the seller to give the buyer more concession than the limit, meaning more than 2% of purchase price for a conventional investment purchase for example. As of late, FHFA (makes the rules for most mortgages) is now requiring written confirmation from the contractor that the invoice being paid relates to work that has ALREADY BEEN COMPLETED. Because the lender tends to not see seller side payments for things like this until a day or two before closing, this change can ruin a deal that's otherwise ready to close. So beware. 

Some solutions: 

1. Have the seller pay the deposits to the contractors before closing, rather than at and through the closing. 

2. Delay the closing and get the work done really quickly.

3. Change approaches and have the seller give more concession if you're currently under the "interested party concession" limit. Here's a link to the limits.

4. Lower the purchase price.

Some non-solutions:

1. If the property will be "investment" in occupancy, rather than primary residence or second home, the seller cannot give the buyer a temporary buydown.

2. The closing agent or attorney will tell you they cannot put the contractor deposits in escrow without showing them on the CD. 

Hope this helps you avoid a last-second transaction failure.

@Scott Weston and @Luke Sanders. I looked at Sapphire pretty hard last year, and made a couple of offers there, but in the end decided it wasn't the market for me. I too live in Asheville, so Sapphire was closer than Cashiers and Highlands. And the locals in Highlands have been fiercely debating STR's and regulations for the last few years, so I wouldn't be comfortable buying there. That also made me hesitant about Cashiers, meaning I worried that the mindset would spill over. Sapphire is much more of a vacation home community.

The deciding factor for me was that Sapphire and Cashiers don't have a lot to do, except for golf and hiking. Sure, there's a little beach at the one lake, and the shops at Cashiers, but to me it's just not quite enough. Lake Lure, for example, has more to offer, is more well-known, and is closer to some other great towns like Black Mountain and Hendersonville. 

If I was buying south or southwest of Asheville right now I might be trying to get very close to one of our great new downhill mountain bike parks, meaning Ride Kanuga in Hendersonville or Ride Rock Creek in Zirconia. Both are drawing more and more tourism, as well as relocations, and are holding more and more special events and competitions.

Hey @Steve Holly. Like @Mark Munson I think a conventional cashout refi would be better. You can pay if off quickly, just like a HELOC, and your interest rate will likely be about 4% lower. Sure, you won't be able to draw again on it, and you'll have to pay interest on money you're not yet using, but the benefits seem to outweigh the comparative negatives. This of course assumes the home his habitable enough for Conventional, and that the scenario would work for your DTI and credit and such.

Well, NFCU doesn't have the greatest customer service ratings, but if you can get in for just 5% that's pretty attractive.

5% down? Will the loan be primary residence or investment?

@Tristan Bennett. DSCR is a great option, but not as great as Conventional. We often find opportunities to make Conventional work, which means a rate that's likely 1% less, no prepayment penalty period (most but not all programs have such), less risk of the deal falling out due to a low rent estimate from the appraiser, and less chances of your offer getting rejected due to it being "other" type financing. Happy to discuss further if you want to setup a call.

Hey @Kelly Olson. I agree with @Robin Simon. Conventional financing is always better if your DTI can work. And even if you get to a point where the home will cause your DTI to be a little too high, we can use a rent estimate form from the appraiser and count 75% of the figure to offset most or all of what the property will add to your DTI.

DSCR is a great backup option, but the downsides are (a) if the appraiser's estimate comes in lower than 100% or so of what the property's PITIA will be the deal will likely die, after you've spent quite a bit of money and time, (b) nearly all DSCR programs include a prepayment penalty for the first 3 years, unless you buy it down or out, (c) the rate is higher, and (d) your offers are a little less attractive because the financing type is "other" rather than something more preferred like cash or conventional.

Happy to discuss further if you want to setup a call.

Hey @Sean Boyle. Another option: Boxwood Homes. My friend Mitch Roedel there can help you. I'll send you his contact info.