All Forum Posts by: Kevin Romines

Real estate that is held long term builds the best and biggest wealth. That said, you have equity and some cash to leverage into something more. The question is, what is the something more that fits your lifestyle? A HELOC is a great tool to use especially if you have a low existing 1st mortgage on the property. Don't give up that low rate just to get the cash out when you can do a HELOC instead. Can you make your existing home a rental and cash flow, it sounds like you can. If you do, you will then be on the hunt for your next owner occupied home. You can put a smaller down payment on that home and still have cash to buy a 2nd rental.

Bottom line, the more cash flowing properties you have the better your monthly cash flow and the more long term wealth you will build. So if it were me, I would be looking to obtain as many properties as you can while maintaining a certain amount of reserves to cover repairs and maintenance. Then let that cash flow build into your next purchases. 

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Look at Pen Fed Credit Union. they will do a HELOC on a rental up to 80% so long as you don't any more than 4 properties total, including your primary residence. There are other lenders doing HELOC's on rentals but few of them out there. Pen Fed has some of the best terms for these loans.

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Hard money is specifically non-owner occupied only. 

That said, you can go that route so long as you agree and most likely will sign a doc saying it will only be Non-Owner Occupied. A private loan can be done to either scenario. I'm not sure why you would consider abandoning a private loan for this scenario unless their terms weren't favorable? Most hard money that I broker will do 80-90% LTC or loan to cost with a max of 75% ARV or After Repair Value. So yes, you have equity in the land and that is perfect, but you need to know what the final value will be to determine what your final ARV will be?

That said, the hard money loan is workable and one of the best ways to do some of the work yourself. 

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Pen Fed is one of the best places to get a HELOC on a rental.

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If a person gets caught committing mortgage fraud / bank fraud, the punishment is a million dollar fine and 30 years in the pen. Is that worth the savings you could have with the down payment? I think not. Bad advice from a guy that knows better. Don't do business with a person of this nature. 

There is no need for a commercial loan if you can provide the documents to prove your income. A conventional loan will fit the bill at that point and now both Fannie and Freddie allow you to move title of the property to an LLC that the borrowers are the majority members of without it violating a due on sale clause.

I would consider a conventional 1st, then a Non-QM DSCR next and last a commercial loan, in that order.

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The reason someone might take out a HELOC at the time of a purchase is primarily to avoid mortgage insurance. Meaning you can avoid mortgage insurance if your 1st mortgage is no more than 80% LTV. So the limitation of the max. amount that the HELOC can be is the maximum CLTV that the 1st mortgage allows. If the 1st mortgage is a max. of 95% CLTV and the 1st will be at 80% LTV, then the maximum the HELOC can be is 15% of the purchase price. 80% 1st + 15% HELOC CLTV is 95% the borrower brings in 5% down and avoids mortgage insurance on the loans. However, there is no free lunch here, the 1st will be aware of the HELOC in 2nd position and you will have a pricing hit or a little higher rate due to the additional risk of the HELOC.

You will also be subject to how the lender views the debt of the HELOC. Some lenders only count the payment that is showing on the credit report based on the balance reported. Other lenders will count the full amount of the credit line as if it is pulled out and being used and the associated payment is if all funds are out. In this case, being a purchase, you most likely have the full amount pulled out, so they are hitting your DTI with the maximum payment.

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If you have limited income and have already struggled to keep both mortgages paid, it would be doubtful that you would qualify for a larger loan. I agree with what the others said, get your son a public defender and don't go into debt over this. Look at ways to increase your income or you will be forever stuck in the mode of barely getting by?

If you have a primary residence, think about taking out a HELOC for up to 90-100% to cover the down payment. If not, get the seller to carry back 15-20% with you coming in with 5-10% down and the hard money lender for the rest? Partner up, 50% of a watermelon is more filling than 100% of a grape. Get a loan from family members? Just to name a few.

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I have never heard of such a seasoning requirement. I'm not sure if I am misunderstanding what you are saying or if the lender has some highly oddball seasoning requirement? You can now do both a Fannie Mae and Freddie Mac loan in your personal name and then transfer the title to and LLC after closing without violating the Due on Sale clause. Fannie changed theirs back in 2016 and Freddie Mac just changed their rules allowing this.

That said, the best terms you will get for this loan will be Fannie Freddie. You can also do a Non-QM loan directly to your LLC with you giving a personal guarantee. There is only a seasoning requirement if you want to pull cash out and that is 6 months with Fannie Freddie or 3-6 months with Non-QM loans. If you don't want any cash out, there is no seasoning requirement. There is no additional seasoning requirement to move the property to an LLC that you are the majority member of. You already have met any seasoning requirement to get a cash out refinance if that is what you are wanting to do?

So again, unless I misunderstood, this lender has a highly odd requirement. Get a new lender!!!

I hope this helps?