All Forum Posts by: Sam Fickel

That should answer a lot of your questions, but in regards to getting in trouble for not living there for a year...

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The servicer would have the burden of proof to prove that you planned on committing mortgage fraud prior to origination. They would have to find texts/emails prior to closing or other statements that you had planned on moving out. The worst they can do is call the loan due. They can't change the terms of the loan, so they can require it to be paid in full within a certain amount of time, so you can refi or sell the place.

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Obviously that's the worst case scenario, and very costly for both sides. Why would they want to do this? Well... If you're not making your payments, they can investigate. Otherwise, why would they want to go through that hassle?

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Obviously, this isn't to say that you should do it - by no means am I advocating for it. But don't be super worried if you don't end up living in the property for 12 months. It should be really easy to blame it on changes in life circumstances.

@Karine Arditi I made a video about this the other day, hope it helps https://youtu.be/iZ1OMKWfjFg

FHA Pros:

-Friendly to lower credit scores (580-680)

-Can buy multi-family with the same 3.5% down payment

-DTI up to 55% (vs 45-50% for conventional)

FHA Cons:

-More difficult property/appraisal requirements

-Frowned upon by agents, so the offer is weaker compared to conventional

-LOTS of additional back-end stuff that makes a lenders job more difficult

-If you're in a community property state, you have to include spousal debts even if they're not on the loan

-Permanent mortgage insurance (but if you put 10% down, it'll go away after 11 years)

-Fixed mortgage insurance (0.85%). Once your credit is past 680, conventional MI is usually lower.

-Upfront mortgage insurance premium (UFMIP) of 1.75% (financed into the loan amount, like negative equity)

-Higher rates than Conventional (assuming 720 credit)

~You can only have 1 FHA loan at a time (there are exceptions though) so you'll have to refinance out of it if you want to house hack multiple 2-4 unit properties.

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If your credit score is 680+ and you're NOT buying multi family, then conventional is the way to go. ESPECIALLY if your income is less than 80% of the Area Median income (AMI), you can get a Home Ready (Fannie) or Home Possible (Freddie) program which offers even better rates than regular conventional, and only requires 3% down EVEN if you're NOT a first time buyer.

Look into delayed financing. As long as the source of the cash payment can be traced to your own funds and it's an arms-length transaction then you should be able to make something work.

Delayed financing tends to have a lot of lender overlays to be sure to talk to your lender about specifics.

@Gaetano Ciambriello it's important to note that this only applies to Fannie's likelihood of issuing an approval on the automated underwriting system. The borrower is extremely unlikely see see this change because pricing is still based on the lowest mid-score.

I've found that people get easily confused by this because most folks don't know what an AUS is

@Kevin Cespedes the easiest way to do it is Loan Amount ÷ 0.72

Subtract the answer from your appraised value, and that's the money you can pull out.

I say 72% instead of 75% to account for closing costs.

@Chris Szepessy we bought our first house a few years ago and I'm wanting to jump on REI. I keep finding what appear to be good (long distance) deals and when I casually bring it up, she immediately shuts me down with no second thought.

House hacking would never be an option, her privacy is too important

@Amanda Thompson any chance they were merely pet sitting? Did your maintenance guy see all 3 pets just once or a few times?

I listened to the podcast and got inspired to buy the new Multi Family Millionaire book on audio.

It ended up having the reverse effect I expected.

My wife been preeeeetty apprehensive about the idea of REI, but she won't listen to the podcast because she can't get over Brandon's voice (no offense Brandon!). So when I heard about Multi-family Millionaire audiobook "performed" by a 3rd party, I jumped on it and have listened to 2 hours so far with her.

I was hoping that this would be the key to changing her mind, but there are so many horror stories and worst-case scenarios in the book so far that she mentioned it's making her even more turned off to real estate investing!

Did you have an apprehensive spouse?

What did you do to change their mind?

@Evan Kaczor hi, loan officer here. I can talk in terms of conventional financing.

It honestly doesn't really matter where you start, as long as you do both within the same calendar year OR you suck up and pay more taxes to uncle Sam. I'll explain why later.

If you buy the primary first and the investment second, we can use 75% of the anticipated gross rent to help qualify for the investment property.

If you buy the investment first, we can use 75% of the gross rents to offset that mortgage to help you qualify for your primary purchase.

You didn't bring this up, but if you buy your primary first, live in it, then buy another primary and convert your first primary into a rental, we can use 75% of the gross rent to help you qualify. This is called departure residence income. I made a video about this just the other day.

https://youtu.be/iZ1OMKWfjFg

If your income isn't great, you'll want to do both in the same calendar year (or at least before you file taxes for the following year) because you'll file a Schedule E (rental income). The IRS makes it incredibly easy to avoid paying taxes on rental properties by making it possible to write off everything under the sun. This is good for your bank account, but horrible for qualifying, because conventional loans go off your net income. Oh, and we still have to start with 75% of rent.

Therefore, the most you'll be able to offset is with a lease agreement WITHOUT a schedule E.