All Forum Posts by: Sasha Mohammed

Hi @William Freeman there is a lot to unpack here, i'll try to keep it simple

simple question, simple answer - YES you can use gift funds from your parents for an FHA loan. however, there are limitations on how much, and what it can be applied to and how. A lender has the option to "overlay" FHA guidelines on this, too, so you'll want to talk to your individual lending institution during your pre-approval process regarding specifics.

... also, the lender will want to "source" the funds of the down payment. your parents would have to complete a "gift letter" indicating that this is not a loan, this is a gift, and there is no repayment on it. Also, they will likely have to provide 2 months of their bank statements to show the underwriter where those funds came from (or prove they are 2-month seasoned). 

A couple other things to consider - FHA triplex (3 and 4 unit specifically) will have a Self Sufficiency guideline added. You can google that (to keep the post short-ish lol).
Lastly, since you're mentioning partnership.... given that this is your parents, on an FHA loan, I would just stay away from trying to do an LLC after closing if that's what you were considering.

hope this was helpful! 

Dont get discouraged! There are lenders out there that think outside the box

Bank statement program is one option, but I also have one lender that will go off of 100% of the 1099 income - NO tax returns needed.

20% down, max 50% DTI, so long as you have a 2- year history with the same business (sounds like your guy meets this), we can use just the 1099 to qualify.

There are lenders out there, it's just about finding the right fit for your needs.

There are lenders out there for him!

I have one lender that will go 100% off the 1099, no tax returns needed.

20% down payment, 50% max DTI, just need a 2 year history of 1099 from the same place (which sounds like he meets).

Dont get discouraged! 

Also since you mentioned DSCR - DSCR would mean he cannot live in it. Consider there being a giant wall between consumer financing (a house you live in) and investor financing (one you are not allowed to live in).

I suggest reaching out to an investor-friendly brokerage for this. 

Example: I have maybe 4 or 5 F&F lenders off the top of my head that could probably do this loan for you, but they'll each offer different terms (rates, leverages, fees, etc), and knowing your specific needs/ goals would help weed some out. 

You could spent days trying to navigate this space on your own, and picking one lender out of the blue likely wouldn't net you the best results. 

Broker can do the shopping for you, and often get you better terms than you could get yourself due to pre-existing relationships. 

@Taylor Robertson the recuperation calculation up there ^^ from @Reid Chauvin is fantastic for seeing cost vs benefit tangibly. 

Everyone's strategy and goal is different. Simplified:

IF your goal is to maximize your initial equity, and your thought is rates are going to come down in the next year or two, it might make more sense to put the money into down payment instead. 

IF your goal is to keep the monthly payment as low as possible so you maximize your CASH FLOW, it might make more sense to put the money into buying down the rate. 

A refinance is always an option if/when rates come down, but also not a guarantee. Many factors could prevent you from refinancing as planned/ expected, so be open to it, but also don't bank on it. 

Also, there are so many rabbit-holes to go down here. What if the monthly savings don't really matter to you and you care more about bigger-picture investment strategy? what if you took these savings... 
$30-ish a month (put the $5k toward down)
$83-ish a month (put the $5k toward rate buy-down)
...and put those savings back into the monthly payment toward principal? 

What if you did the rate buy-down, pocketed the $30-ish savings, and applied the $52-ish a month (delta between the two) back toward principal?

Even these small-ish numbers will make huge differences over time. (I did the math, but its too much for a BP post. Happy to PM it to you if you'd like)

Typically, the bigger the loan balance, and the longer the time horizon, the more a rate buy-down makes sense. 

Personally, I bought down my rate. But there is no one-size fits all :)

If you're going with Rocket directly (calling the 800-number), you're working with their retail side. No BS, Rocket retail is a rip off. And as others have said, you're likely working with someone newer in the business who doesn't have much knowledge on mortgage at all other than selling you a rate and collecting a CC for a deposit. 

If you call a mortgage broker, and they're working with Rocket for the loan they're offering you, you will get substantially better terms -- brokers get wholesale pricing. AND you'd be able to leverage the broker's knowledge and experience, which is USUALLY significantly more than the boiler-room employee at Rocket direct. 

Talking with a broker will eliminate your wasted time shopping around, as the broker would be able to place you with the best lender to meet your specific goals. 

:) this thread made me so happy! its a shame how many joe-blow LOs are out there spewing out misinformation. 

Great work @Jay Hurst and @Luis Somoza! you guys know your stuff!

@Pedro Bartolomei private money is exactly that -- private funds. all up for negotiation with the individual offering you the funds. 

there is a middle bucket, somewhere between hard money and conventional financing -- institutional investors who deal strictly in the investor-space. 

What type of projects? are you rehabbing? building from ground up? There are lenders that will do those loan types! 

These lenders are typically more experience-driven, and it sounds like you have a few projects under your belt. If its recent experience (last 3 years usually), your experience will be taken into consideration in obtaining better terms (lower rates, higher leverages, etc.)

Hope this helps

to answer your original question first - you absolutely can move from your LLC to a personal name and close with a traditional loan. Typically, since you are owner (or part owner) of the LLC, your seasoning would apply.

One caveat to consider - the county COULD see the deed transfer from LLC to personal and consider it a sale, in which case you MAY run the risk of property tax re-assessment. It doesn't always happen, but its good to be aware that it could.

An alternative is to keep it in the LLC and as others have said, refi into a DSCR loan instead. there are still a FEW lenders allowing for STR, and if not, it could be beneficial to flip this to a long term lease for a year if that checks a box needed to get a loan done (and favorable terms).

Consider reaching out to a couple investor-friendly brokers who can shop terms. You could find you end up with roughly the same rate/ terms on DSCR as you would jumping through all the hoops of A-paper financing.

Lastly, as rates are high at the moment, it may be worth the transactional cost to look into bridge financing instead of long term financing. Gets you out of the ballooning note, but avoids locking you in to a prepayment penalty (common with DSCR loans), and keeps the property in the LLC.

you can try Natalie Wilburn - Lawyers Title Company in Riverside: 951-462-6483

They are my preferred (when i have a choice). Im not sure if they can do assignable, I don't see why not, but you can call or text and ask her. She'll get you answers. 

You can also try First Am, they have a Riverside office as well. 

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