All Forum Posts by: Nnabuenyi Anigbogu

That was what I thought. However neither of us have an FHA loan at the moment.

Hello all,

I have a question about a new FHA guideline that my loan officer just informed me off. He said that starting in Jan 1st, FHA does not allow you to count rental income from a property that you are departing unless you are moving 100 miles away or more.

If this is true that really messes with the property i have under contract. Me and my Fiancee currently own a four unit that we bought with conventional 20% down financing. Since it is owner occupied financing we have to live here for a year (till may 2016). My plan was to have my fiancee buy an FHA 2-4 unit and move into it and we would live separately till may when i would then move in with her (would satisfy OO provision i signed). However since her name in on our current unit as a cosigner, if they refuse to count the rental income from the other three units, her DTI will be insufficient. My LO stated that if not for the new rule regarding 100 miles we would have no issue (when we prequalified last year we were fine)

Now i have explored the legal side with multiple attorneys and loan officers and have been assured that as long as i live in the 4 unit that we currently own, there is no issue with her buying and living in the FHA building (both would still be Owner occupied). As long as we are okay living apart till may there is no issue (the other place is not too far away so no issues for us to maintain two separate addresses till we get married)

Does anybody have any insight into this new guideline and is there a Loan Officer that is able to make a loan like this work? Let me know

Thanks

Yeah this is a bank requirement. Some bank dont see a reason to pursue loans that small since they dont make much money on it. You would have to approach smaller banks or credit unions to see what happens.

I agree with @Roy N.  I would prefer the information upfront. Give how hard it is to evict in Chicago, and i assume its just as hard in CA, i would be happy to let her out of her lease. Especially if she keeps the place show ready and i am able to start marketing it immediately. It is not a good business decision to try to stick it to a struggling tenant that you know you will have to evict eventually. I might not like the situation but i can work with it if she is upfront and cooperative.

If you do not plan on occupying the second home as your primary residence then you can buy it as soon as you have the cash for the downpayment. Since you wont be living there it would be classified as an investment property and would have a higher downpayment and interest rate.

Now if you want to buy it to live in it then you would have to wait for at least a year. If i remember correctly, VA has the same restrictions as FHA in that you have to owner occupy for at least a year after purchase. So you can't buy a new primary residence till then.

You should not lose your earnest money if you pulled out of the deal assuming the seller did not want to credit you for the damage

If you don't live in the same state and can't move in you will have to buy it with a conventional investor loan. That is usually 20-25% down and a slightly higher interest. Also without a background as a landlord for 2 years you might run into some issues with certain banks.

Given that it is your mothers property maybe you can work something out with her. If she does not need all the sale cash at once and owns it free and clear you have plenty of other options of acquiring the property. Seller financing being one of them. 

Congratulations. I would love to know the price point you are operating at in that neighborhood. I like to compare and contrast for my area (Northside) and see how the numbers play out. 

@Wendell De Guzman stated. You cannot sell or encumber the property for more than 120% of the purchase for 90 days.  Since my flip is going to take about 4 months i figured it is worth it. If i finish it in less time i can still market it but i can't sell till those 3 months are over.

Also from the hard money side we had to be creative because the PP + rehab was over the 120%. What we did was set it up as two loans. The first loan was for the PP and a chunk of the rehab. The second loan will be in 3 months and will be a refinance where they give me the rest of the rehab money. That way the property is never encumbered over Fannies limits.

As Jacqueline stated Prop A is cash flow negative and to me that is a non starter. Even if in 5 years you can gain significant equity, there is no way to know what will happen by then. What is appreciation slows down? It is akin to gambling and investors are not gamblers. Even if it appreciates, with the amount of cash you are paying just to keep it afloat you might end up just breaking even in the 5-10 years.

Prob B is also cash flow negative once you factor in maintenance and reserves. I personally would not buy it either especially given the fact that you said appreciation is much less likely.

That is my opinion based on the initial reading of what you wrote.