All Forum Posts by: Stephanie Medellin

@Cayton Green  This probably won't be a popular opinion, but unfortunately a closing disclosure isn't an indication of final approval or a guarantee that the loan will close.  While it's not common, the rate can be changed prior to closing in certain circumstances. This is one of them. With a program change or other change in loan terms, or if your rate lock expires, the interest rate can change. If property value comes in lower than expected and the LTV changes, interest rates can change. If the change in interest rate is larger than 0.125%, you will have a three day waiting period to "think about" whether you want to proceed. I'm certainly not saying this is a great business practice, but it's not illegal to change the rate after the closing disclosure has gone out. The property does not qualify for the loan your GF applied for. They could deny the loan, but they are offering an alternative.

The loan officer should not have indicated that you were ready to close on your closing date if they did not have final approval.  They should have been in communication to let your GF know what else they were waiting for.  Ideally, they should have ordered the questionnaire in the very beginning, or asked you general questions about the complex before asking you to pay for the appraisal, since the questionnaire is less expensive.  For anyone purchasing a condo, please do not remove loan contingencies before learning whether the condo project has been cleared by underwriting.

The appraisal is typically an out of pocket expense, similar to the home inspection, that the applicant will be responsible for whether or not the loan closes. The good news is, you most likely can transfer that appraisal to a new lender if you've already paid for it. Before doing that, try to find out why this condo is non-warrantable. If she's doing a cash out refinance, she's most likely already at 75% LTV or less, which should only need a limited condo review.

You can go to a new lender with enough details to hopefully avoid this problem a second time.  I hope things work out, and I'm sorry this happened to you.  Best of luck and ask a lot of questions upfront!

Assuming student loans are showing as deferred / $0 monthly payment on your credit report, ask if your lender is using 0.5% of the balance rather than 1%. Are they using the rental income to help qualify? Are there any other small debts you can pay off to reduce your monthly payments? Any co-signed debt being paid by someone else? These are just some suggestions to help lower your DTI.

If it's still too high, there are DSCR and even no DSCR loans that are based on the rental income only. These can get you out of a jam if you're in a very high interest rate loan, or a short term hard money loan.

@Dylan S. 3% down will work on a single family home, but for 2 units you'll need a minimum of 15% down - that's why many people turn to FHA when purchasing units. One strategy may be to buy a single family home with an accessory unit or guest house. It's treated as a single family home for lending purposes (and you won't be able to count rental income), but you can rent out the guest house for additional income after closing.

Home Possible is a program that allows 5% down on 2 units if you're under the income limit for your county, but Orange County's limit is $68,880, so that's probably not an option unless you earn commission or overtime that's not used.  You would also typically add the rental income to your total income, which usually puts people over the limit in high cost areas. 

Lenders will also want a 2 year work history (either college or a previous job) in addition to your current job.

You can use it right away.  It's perfectly fine to use funds borrowed against another property as a down payment.  Now if you just cashed out from your primary residence and want to buy a new primary residence, that will be a problem, but it sounds like this is a rental.  

@George Paquette  Yes, 80% is possible, but it won't be a conventional loan.  Where is the property located? 

@Mason Yost  Standard closing documents say that you will move into the home within 60 days, and will continue to live there for at least a year.  If you move out after a year,  you do not need to refinance.

@Cory Lucas  It actually sounds like a really good deal.  If there is an additional transaction cost (usually 3-4% with 0% offers), be sure to factor that in.  

One thing to consider is how many other credit cards and credit lines you have open.  Maxing out your only two cards with a relatively limited credit history can do some damage to your credit score until the balances are paid off.  Once they're paid, your score will go back up.  If you have 10 other cards with large credit limits, it probably won't affect your score as much.  Just something to be aware of.  

I've seen people with previously good credit get into the trap of financing repairs or improvements on credit cards.  When they try to refinance a mortgage with that additional debt, their score is lower and they won't qualify for the best rates on a mortgage.

@Justin McElroy  I think most lenders who will be financing construction costs along with the purchase will need contractor bids as part of the loan application, and you may need approved building permits before closing.  Those things will likely take the most time.  You should really have an easier time finding a construction loan for a primary residence vs an investment, so that is an advantage.  

Is this a primary residence, vacation home, or investment?  On permanent foundation?  Owned land or leased land?  What is the value vs loan amount?

@Marcus Holloway You will not be able to get additional cash out from this transaction, you will only be able to pay off the owner after 12 months of payments. Since you mentioned BRRR (which usually includes getting cash out?) I think this may be your problem. You need to make sure any new lender does not have an overlay saying land contracts are ineligible.