All Forum Posts by: Stephanie Medellin

It's possible to get a mortgage on properties on leased land, the lease just needs to meet the lender's guidelines. Typically they want to see a term at least 5 years longer than the mortgage term. For example a 20 year mortgage would require a lease with a minimum of 25 years remaining. Conventional loans as well as some DSCR programs allow land leases.

A W2 job is not required to qualify for conventional financing, only steady income that can be documented.  People have income from many different sources - investments, pensions, trusts, rental income, etc.  If you show enough rental income after expenses on your tax returns, you could (in theory) qualify on that alone.

New mortgage accounts (or any new account) may temporarily lower your score, but they should bounce back after you establish some payment history.  There are plenty of investors with multiple mortgages who have excellent 740, 760, 780+ credit.  Be sure to keep your revolving credit utilization (credit cards) at a low percentage of your total credit line, and that should keep your score up if everything is paid on time.

I'd guess it's a smaller lender or bank that might keep its loans.  It sounds like they have guidelines against absentee landlords.  Conventional financing from national / large lenders (and brokers offering conventional financing) wouldn't have these restrictions.  

Those numbers seem reasonable.  Depending on your property taxes and insurance costs, you can adjust your loan amount if needed to keep your cash flow positive.  Loan to value will be determined by the appraised value compared to your loan amount.  If the house appraised for $200k and you borrow 150k, that would be 75% loan to value.

There really shouldn't be an issue - there aren't too many loan programs that would require 40% down unless it's a hard money loan and in really poor condition.  

The buyer can still put $100,000 down and borrow $150,000, it will just be a lower percentage of the purchase price.  It may change interest rates slightly, but 35% down compared to 40% down should be fairly minimal, if there's any difference at all.  It really shouldn't stop the deal from getting done.

Hypothetically if the buyer HAD to put 90% down, it would be 235,000 x 90% = $211,500.  Then $211,500 + 15,000 = $226,500. 

Hi @Sandra Roddy, you could certainly do cash out DSCR loans on a few of the rental properties to cover these expenses, but you would need to choose the properties that don't have significant deferred maintenance to qualify for the loans. That's your best option if the properties are owned in an LLC. DSCR loans are based solely on the rental income of the property, so you won't need to show tax returns. You can get 30 year fixed rate terms for stability. You don't necessarily need positive cash flow to qualify. What are the estimated values of your homes?

The valuation shouldn't be much different between an FHA and a conventional loan. The same methods are used regarding finding comps and making adjustments. The lack of comps was likely the biggest factor here. If your agent found comps (duplexes, not single family homes) that should have been used, you could try to convince the buyer to dispute the appraisal and have your agent provide those comps to the buyer's agent & loan officer.

How did this turn out?  Was your buyer able to get the appraisal revised?

Just reading your question again -

Say the buyer is still paying $250,000 and putting $100,000 down.  Originally that was 40% of the property value, but now the property value is only $235,000.

$15,000 of the $100,000 is now going to cover the difference between the value and the purchase price, since the lender won't lend on that.

Now the buyer has $85,000 left of the original $100,000.  That's 36.17% of $235,000.  So the buyer's down payment is 36.17%, not 40%, and he's paying the $15,000 difference in cash.

I hope that makes sense.

@Sam Leon It's pretty straightforward and virtually all lenders follow the same guidelines - even hard money or investment purpose loans. The loan-to-value (LTV) ratio is based on the lower of the contract price or the appraised value. In this case, the LTV will be based on the value of $235k and the buyer will need to bring in the difference.

If they are putting 40% down, they need to put down 40% of $235,000 (which is $94,000), plus the additional $15,000, for a total of $109,000.

They can also put a lower % of the appraised value down, and the loan terms will be based on that LTV. With condos, depending on whether they will be occupying it as a principal residence or using it as an investment property, there is less scrutiny on the HOA at different LTVs. If it will be a primary residence, they can put as little as 3% down. It doesn't have to be 20%. But the % will always be based on the appraised value. If they put 3% down, that's $7,050, plus the additional $15,000, unless you agree to lower the purchase price.

While the appraiser may have given the most weight to the sales price of the adjacent condo, they always use more than 1 comp.  They will use comps from other complexes.  They can't based an entire appraisal on only one other sale.  

The buyer could try disputing the appraisal if the appraiser didn't make proper adjustments for condition. 

 Conventional lenders will absolutely be able to find other properties you own, and they should be disclosed on your loan application, especially if you're personally obligated on the loans.  Just because something is not on your credit report does not mean the liability isn't there.

To qualify for a new primary, consult with a good loan officer about how your rental income is being calculated on your taxes.  Once you convert your current primary to a rental, you'll be able to use 75% of that income, but will need to show a lease.  That should offset most of that $3162 payment and free up your other income (including rental income from your tax returns) to qualify you for a new primary residence. 

To buy and renovate another rental property before purchasing your next primary, you just want to make sure the project is complete and leased.  You'll be able to use 75% of that rental income to offset your payment.