All Forum Posts by: Sasha Mohammed

This right here means you should go FHA. The down payment for conventional duplex is 15% down, you can do FHA with 3.5% down.

if you start moving toward 3 and 4 unit properties, you have added guidelines on FHA, i think its called self sufficiency or self sustainability. that will change things. but if Duplex is what you're after, and a low down is the main priority, then FHA is your best move.

actually @Erik Estrada this is incorrect info. usually FHA, even despite lower interest rates, does not result in a lower monthly payment. its typically higher, actually. mostly because you're financing the up-front MIP, and the monthly MIP is out of this world expensive. to compare (ballparking, not on any specific transaction) FHA MIP could run you $350 per month, whereas conventional MIP could be somewhere in the $160 per month or even less depending on credit score.

the only way to know for sure on monthly is to run a side-by-side comparison. 9 times out of 10, conventional will result in lower monthly payment, despite carrying a higher rate. Specifically due to mortgage insurance premiums. 

Hi @Derrick Cameron Jenkins! typically, portfolio loans will require 5+ doors, along with a handful of other requirements to be met. 

Using VA loans to house hack is a fantastic strategy! I would suggest you look into alternative financing methods to refi your current VA loans. My favorite is DSCR lending if they're investment properties. Often times, these loans do not come up on your credit report, as they are commercial loans. Meaning you're making some way in your DTI as well as freeing up your VA entitlement.

Hope this was helpful! 

hi @Jose Aguilar!

FHA is typically more stringent on property quality and condition. I've had FHA appraisers give us a hard time over chipping paint, or silly "health and safety" issues like a cracked step up to the house (trip hazard). You'll have a much easier time with conventional financing just on the property itself if you intend to find something that allows for value-add.

A note on sellers accepting FHA offers.... over 2020 and 2021, we saw most govy offers (FHA and VA) be put at the bottom of the pile for sellers. This is mainly because of the Amendatory Clause. Basically this states that if the property does not appraise for the offer price, the buyer (on an FHA or VA loan) can walk away from the transaction, and is entitled to their EMD back. Sellers at that time did not like this, especially when they were getting signed agreements from other buyers offering sometimes $100k over appraised value.

now, in 2022, with things slowing down, FHA/ VA is not looked at as a black-eye as muchhhh as it was the last couple of years, but FHA also kind of has a stigma of being associated with less-qualified buyers. they allow for lower credit scores, higher DTI's, lower down payments.... its a psychological thing.

if you have the ability to do 5% down instead of the FHA minimum of 3.5% down, you'll end up in an overall better loan (less mortgage insurance) with a lower payment. plus, FHA eats up 1.75% of your equity just off the bat with the up-front mortgage insurance that conventional financing does not have.

Dont get discouraged whichever way you decide to go. But i also typically will recommend conventional if its feasible and if its in the best interest of the client (which it usually is). 

Hi @Rachel Riley! 

Love the strategy! you are uniquely positioned with experience now in title, design, and RE sales! 

Personally, i don't love HELOCs for acquisition. Everyone has a different level of risk tolerance, and different opinions on the matter. My beef with the HELOC is the rate is typically adjustable. There are so many facets to rehabbing a property, and so many moving parts. I personally prefer stability in all areas i can find it. having a note which fluctuates on rates and payments, to me, sounds extra chaotic.

As you gain experience in renovating or flipping properties, more lending options will open up. There are lenders who's specific niche is rehab lending. you wouldn't be able to live in the property while you have one of these loans out, they are strictly for investment properties (its how they get around consumer protection laws), but they loan you acquisition money AND rehab money. Short term note, usually 12-24 months, Interest-only payments, and no prepayment penalties. Once the project is done, and a tenant is in the unit (or units), you can refi the debt into a long-term, 30 year fixed. DSCR lending is great for this type of BRRRR as it allows you to qualify off of the rents received, as opposed to your personal ability to repay, and more often than not does not require tax returns or any type of income verification. you can do a cash-out refi, pay off the existing balance, and often walk away with cash for your next project. 6 month seasoning (sometimes less-than) in order to use new appraised value for your LTH transaction.

For the house you intend to live in, VA is an amazing option :)

Hi @Azaleia Sinclair!

my only recommendation is to stay away from any big call-center type lending options. Loan Depot, Quicken Loans, Lending Tree, etc. 

Most of these guys are newbies for starters; companies like this have a call-center atmosphere where they really grind down their people and force longggg hours, which results in high turnover. This means you probably won't land with someone who's seasoned and knowledgeable about all the facets of mortgage lending, and even less so on the specific nuances of a VA loan. 2nd, once they "sell you" on a loan and take a credit card for a deposit, you're often passed on to someone else entirely for the remainder of your transaction... typically a processor of sorts, which could be a challenge if you have questions, or if something pops up that could pose an issue for your closing.

A Broker has the ability to shop multiple lenders on your behalf, so one call would result in access to many different lending options. We (as a brokerage) have 90+ lenders and are constantly growing based on the needs of our clients. I'm bias, but i suggest reaching out to a broker. We also work on your transaction from start to finish, so we have experienced working through issues and may have solutions that a newer "industry pro" may not. (disclaimer, i am not licensed in FL, i'm just speaking in generals for anyone else lurking these forums as well).

Not to say that there aren't new brokers out there, but your chances of having a good experience go up exponentially when you work with someone knowledgable and seasoned. 

Best of luck on your RE journey! 

Hi Rodney! i agree, totally misleading. I've been in the biz a long time, and for the first time last year, ran into a lender who told me the rate is "locked"... but followed up with "but its not a forward-moving lock". "...so it's not locked then!" i spat back! Im finding that the terminology each lender uses can be very different across the board, and i agree, its confusing and misleading for EVERYONE in a transaction, newbies and seasoned vets alike. 

I suggest moving forward asking for a "lock confirmation", or in a consumer loan setting, asking for a "locked LE". 

it may not resolve your issue still, but having it in writing is better than nothing, and hopefully gives you a leg to stand on if you need to duke it out. 

Best of luck! 

hey @Colby Livingston, OC is my market and the room-by-room househack was my strategy as well. i had been doing this for almost a decade on rentals, signing the lease myself and then filling the rooms to subsidize my cost (with the LL's permission). given our market, it took me a long time to buy, but i was finally able to get my foot in the door in Sept 2021. 

OC is expensive. and to be honest, the 5% down strategy is the goal if you can find a house cheap enough to allow for it. I ended up having to put more down given that the home prices had gone up so much over 2020 and 2021, i was squarely in "jumbo" territory for a 4 bedroom, forcing me to put 10.1% down (at that time was available, now is tough to find even 10.1% down). there are some areas of OC that are still reasonable in price. Orange for example, i think Single-family homes are still in the $800k range. 

here are my suggestions: find a house that is in good shape (good bones, newer roof, recently replaced a/c...) but still offers some value add. Decide how much you can afford to spend on the mortgage, and do your research on what others are renting rooms for in the area. determine how much you would need to rent each room out for in order for your own cost of living to be comfortable, and if the numbers don't pencil out... PASS. don't force it. 

If you're nearby a college or two, that is helpful. i also fount its helpful if there are a lot of fun things to do in the area as i imagine you're not looking for a 50-year old divorcee as a room mate, and would probably prefer people your own age or close to it. I considered doing this in south county, you can get HUGE yards with pools for under a million still i think, but its all suburbia down there and mostly families. i suspected i wouldn't have as many young people in those markets as i would here (i settled in Costa Mesa). 

i have learned a lot during the last decade doing this on previous homes and now my own -- systems that we had to put in place to eliminate pain points (like a cleaning schedule to make sure everyone was contributing), so i'd be happy to discuss all of these little things with you anytime you'd like. Or Im happy to share the numbers with you if that's what you're interested in. feel free to PM me. 

it's a great strategy while you're young and dont have a spouse and kids. and eventually, as i can refi down the debt, and my equity grows, i can potentially shed a roomie or two and have the house to myself; or pack up and move in a few years and buy the next. all while keeping my cost of living/ ownership less than i would be paying for rent on a 1br in OC solo. 

wishing you the best of luck! 

hi @Jerry Santiago, mortgage broker here! Truth is, no one can tell you "yes" or "no" on this one. I always tell my clients there is no one size fits all with mortgage, and it's very true. one person i explain points and rate-buy-down to, they say "you'd have to be nuts to do that" and another client would say "buy it down as far as i can go, don't care how much it costs". 

what i recommend is doing the math on the recuperation period. so in your example, if the cost is $6500 to save $400 per month, how long would it take you to recuperate the $6500 in added cost? $6500/400/12 = 1.35 years. essentially if you took that $400 per month and put it in a savings account, it would take you a little over 16 months to recuperate the $6500 you spent, meaning you would have to stay in this LOAN for at least 17 payments to have seen the benefit of buying down the rate and prepaying that interest up front (lets not kid ourselves, prepaying the interest up front is what you're doing). 

this is just one way to calculate this tangibly. but there are other factors. Personally, i purchased in Sept of 2021, and i bought down the rate on my own loan. this was because i work a commission-only job, and market swings can make my income unpredictable at times. i wanted the stability of having a lower monthly mortgage payment, even if i ended up refinancing before i met my recoup period. And boy am I glad I did! 

the above scenario, 1.35 years to recoup is not bad at all, but i guess the followup question back to you is -- do you expect rates to come down next year? do you plan to sell or payoff this loan (refi, or lotto win) before meeting the recoup? if yes, then it may not be worth it. But really only you can make that decision for your specific situation. 

Hope this was helpful!

uhh yes this is totally occupancy fraud, and your LO should know better than to be advising you to go about it this way. he's right that people's lives change and situations come up, but to guide you in this direction seems to be negligent behavior at best, fraudulent at worst. consider the implications if the lender found out you had no intention of moving in, but knowingly took out an owner-occ loan.... the note could become due and payable. like, all of it. immediately. worth the risk for an additional 5% cash-out? probably not. and the risk to the LO advising you - a risk to their license and livlihood. 

i dont, however, disagree that the better move would be for you to move into the property. the rule of thumb is you need to live in there for a year, and then you can do what you chose. buy a new primary and rent this one out. as for DTI, you could consider the existing primary a "primary conversion" and the rents from the new tenant would be used to offset the existing PITI.

i can't speak to the income tax implications as i'm not a CPA. but i would consider whether $100 per month in cash flow is even worth the amount of risk/ liability. this is not personally a deal i would be interested in, there's just not enough meat on the bones for it to be worth it. Im assuming you've already taken vacancy and R&M into the equation, but if not, one issue and you're in the red on this one. 

I think personally i would consider selling this one and taking the proceeds for your actual eventual primary. Or if your immediate goal is cash-flow, find a property that offers better returns. deals are out there. if you're finding that you need to cut corners or cheat the system (opening yourself up to more liability) in order to get the deal to pencil out, its probably not one worth pressing forward with. 

Just my 2 cents, respectfully.