All Forum Posts by: Stephanie Medellin

@Jacob Chapman No, you can take a HELOC out with any lender that is offering HELOCs. I would go with the lender offering the best terms.

@Yvonne H. Are you personally obligated for the loans in the LLC, and do they show on your credit report?

I would refer to this page for details on what will be acceptable to count toward down payment on a conventional loan.  You may be limited in how much rent you can count toward your down payment funds.

https://www.fanniemae.com/content/guide/selling/b3...

These lease to own deals are rarely a good deal for the buyer, but they can be very lucrative for sellers to collect large non-refundable option fees.  Why not just lease at fair market value until you're ready to buy?  Put any excess in savings each month and save for a down payment instead of giving it to the landlord to hold.  You'll probably find a much better deal on a house too. 

@Jean Mascary Even if they do allow a second position loan, they likely will want the combined LTV to be under a certain limit like 80%. I am not aware of any allowing 100% financing. Might be out there somewhere, but most will want you to have something invested.

@Leon L.  If the loan is against another property that you own, that would be an acceptable source for a down payment.  In that case it wouldn't be considered 100% financing.

@Greg Gaudet  Depreciation on Schedule E will be added back, so you won't be penalized for that deduction.  

How are you calculating your DTI? Rental income is calculated from Schedule E if you've owned the properties long enough to be reported on there.

The taxes, insurance, interest, depreciation and HOA fees are added back to the net income or loss, then divided by 12. From that monthly average the PITIA is subtracted. That income or loss is then either added to the borrower's monthly liabilities or income (depending on whether it's a negative or positive number). The end result is that you're still getting hit for the monthly payment, but it's being offset against the rental income. It works out much better for your DTI this way.

Using Schedule E it would look like this (with sample numbers included):

Line 21- Income or (Loss): $1000

+ Line 9 - Insurance: $1000

+ Line 12 - Interest: $8000

+ Line 16 - Taxes: $6000

+ Line 18 - Depreciation: $6000

+ Line 19 - HOA: $2000

__________________________________

Total: $24,000

Monthly Average: $24,000 / 12 = $2,000

Monthly Average: $2,000 - Monthly Payment (let's use $1,850 for this example) = $150

$150 would be added to this borrower's monthly income, and the monthly payment of $2,000 would not be counted as a monthly expense because it's already accounted for here in this calculation. So in this example, the DTI is helped by an additional $150 of monthly income.

 Staggering the closings will cause more of an issue for you.  It is much better to get all 3 loans from the same lender and close at the same time.  If you own one or more buildings at the time of closing, they may want to see leases for those to count the rental income on the last purchase, whereas you can use the rental survey from the appraisal and count 75% of the estimated rent if they all close at the same time.

@Wilson Lee  With such a low loan amount, a 15 year loan won't have that high of a payment.  As a bonus, it's paid off much faster!

@Kenneth McCormick  As already mentioned, there is no fixed amount of interest that you have to pay on a conventional loan, and no prepayment penalties.  What's fixed is your monthly payment.  If you put additional money toward principal and pay the balance faster, a higher portion of your monthly payment will go toward principal each month compared to the original amortization schedule.  Your monthly payment, however, will not be reduced by doing this.

You can transfer ownership / complete the sale without involving a real estate agent.

@Will Gaston  It's a little hard to tell from photos, but it looks like there is too long of a span without a post on the girder - it wasn't supported properly.  When the ductwork was installed, did they move or remove some of the lolly columns?  There should be a post every 4 -6 feet.  Regardless of how many people were in the home, the floor should be able to support them.  Unless the tenant removed or damaged the supports in the basement, it's really not their fault.  

The taxes, insurance, interest, depreciation and one time costs are added back to the net income or loss, but then divided by 12. From that monthly average the PITIA is subtracted. That income or loss is then either added to the borrower's monthly liabilities or income (depending on whether it's a negative or positive number). The end result is that you're still getting hit for the monthly payment, but it's being offset against the rental income. It works out much better for your DTI this way.

Using the Schedule E posted above it would look like this:

Line 21- Income or Loss:   $50

+ Line 9 - Insurance:         $4758

+ Line 12 - Interest:          $6800

+ Line 16 - Taxes:              $8326

+ Line 18 - Depreciation:  $4000

+ Line 19 - Service Fees:   $600***

__________________________________

Total:                               $24,534

Monthly Average:   $24,534 / 12 = $2,044.50

Monthly Average:  $2,044.50 - Monthly Payment (let's use $2,000 for this example) = $44.50

$44.50 would be added to this borrower's monthly income, and the monthly payment of $2,000 would not be counted as a monthly expense because it's already accounted for here in this calculation. So in this example, the DTI is helped by an additional $44 of monthly income.

***I'm not entirely sure that "service fees" would be added back, even though they are listed on line 19.  This does not sound like a one time cost.