All Forum Posts by: Stephanie Medellin

You don't need to take the money out of the HELOC and let it sit in your account to use it as a down payment for another property. I can't speak for all lenders but it should be an acceptable source of funds coming directly from the HELOC.

@Erin Wilks  As others have mentioned, your amortization schedule should be in your stack of loan documents that you signed at closing.  For a 30 year loan, it will list all 360 payments with the breakdown between principal and interest, month by month.  Loans always start off with much more of your payment being applied to interest, and only a small amount toward principal.  Why?  In the beginning, you're paying interest on a much larger balance.  On a $300,000 loan, you're paying interest on the full $300,000 in the first month.  Toward the end of your loan, you'll be paying less interest on a balance of $50,000 or $100,000, but it will take awhile to get to that point unless you pay down your principal faster (by making additional principal payments).  Because the payments are the same every month, more of the payment has to be allocated toward the interest.  It's just how loans are designed.  You won't be able to change your payment plan unless you refinance, but since all mortgages are structured this way, even if you could get another loan at 4.875% (which is unlikely because rates are higher), it won't change the amount of interest you pay each month.  The best thing you can do is pay additional principal each month to lower your balance.  This will let you jump ahead on your amortization schedule.

Many lenders will not finance a unique home, if your goal is to refinance after it's completed.  It would be worthwhile to take your plans to a lender before starting construction, and try to line up one or two potential lenders for after completion who will lend on that type of property.

Keep in mind if a house is really unique, appraisers will have a hard time finding comps for an appraisal.  Also keep in mind that comps are constantly changing.  One similar home that sold 6 months ago (giving you an idea of potential value) may not be a comp when you're finished building and ready to refinance 1 year from now (because it will be too old).  If no other similar homes have sold, you're going to run into problems with financing.  Typically lenders will want 3 similar sales.  

 You can typically pay past due taxes at closing with a refinance, and they can be paid with loan proceeds.  It sounds like it could get messy though if you're suggesting accepting a quit claim deed without recording it with the county (based on comments above)?  You wouldn't be listed as the owner of record when you apply for the refinance.  The title company for the refinance transaction may want affidavits to make sure the prior sale was legitimate.  

I'd definitely advise to proceed only with a title company or closing attorney handling this sale.  Who knows what other liens or title issues the property has.  

It's really not common for a Realtor to have multiple private money lenders available to refer.  When I think of private money, it's going to be a family member or friend that has money to lend, not someone who advertises or lends as a business

  Realtors may know of hard money lenders, or mortgage brokers with sources for non-conventional lending if you or the property cannot qualify for a conventional loan.

If the hard money lender is not sourcing the funds, you could either have your family give you a certified check or wire to transfer the money to your account, or they could do either of those to send the money directly to the closing agent.  If they give you a bank check, make sure your bank won't put a hold on it for a week, pushing you past your closing date.  For that reason, a wire to your account or bringing it directly to closing might be the better choice.

If there's any chance you might keep the property and refinance it once it's remodeled, keep in mind delayed financing (within the first 6 months of ownership) will require you to source the funds used for the purchase.  A personal loan from family can be repaid, but a gift cannot.
  

@Reginald Silva  For an investment property, the amount of reserves will vary based on how many properties you own and how much you have outstanding with other mortgages.

If it's a primary residence, you often don't need reserves.  It will depend on your overall financials, and may be lender specific if they have their own requirements.  

If using a 401(k) as reserves, you probably won't need to withdraw the funds through a loan as long as you have access to the funds.  

@Mike Jay  Are you an employee or an independent contractor?  

There is a loan program that qualifies you based on a verification of employment from your employer only - this might be your best bet.  Bank statement loans are typically for self employed individuals / business owners.  If you truly have a job and are not self employed, a bank statement loan probably won't help you.  

An even better solution would be for your employer to start paying you properly, deducting payroll taxes, issuing a W2 at the end of the year, etc.  Traditional lenders won't count income that can't be documented properly, so any loan you're able to get is going to have a higher rate in exchange for non-traditional qualifying guidelines.  

@Alan Taylor  This may not apply to you, but you mentioned "second home" which is a vacation home. 

Lenders won't be able to use rental income to help you qualify for a vacation home.

If you're trying to use rental income to qualify, you would need to finance the property as an investment.  

@Jast Collum Does the 300k balance include the back payments owed? With a 550k value, a cash out refinance will be capped at 440k. Your 1st + HELOC is 338k, leaving about 100k, less closing costs. Is that going to be enough cash out to pay everything off and make the improvements to your home?

Personally I'd have a hard time turning down 50k in assistance, but restructuring your debt can really simplify your finances, so that's a tough decision. I'd be sure to really explore other personal loan options, a fixed rate second mortgage, or even raising the credit line on your current HELOC before deciding to refi out of the 4.1% and pass up the 50k.

Rates have continued to move up...please make sure you're getting an accurate quote to calculate your numbers. 6% for a cash out refinance at 80% LTV might be a low estimate depending on your credit score. The generic quotes you see on most internet sites don't usually apply to cash out refinances. Once you find out the real payment for taking cash out, then you can evaluate if you're saving enough to make debt consolidation worth it.