All Forum Posts by: Stephanie Medellin

I'm assuming this is an investment property?  Lenders don't want to make a conventional loan if you plan to sell the property right away, so yes, this is a conventional guideline that the property cannot be listed for sale. If you're planning to turn around and sell as soon as you refinance, a bridge loan would be better if you absolutely have to pay off the private lender.  Listing the home for rent should be fine.  If it's an investment, a lender would want the property to be rented.

 What we're adding back is the depreciation portion of the mileage deduction.  If the taxpayer deducts vehicle expenses based on the flat mileage rate, the mileage will be multiplied by the depreciation portion for that tax year (i.e. 26 cents per mile in 2022).  If actual vehicle expenses are deducted, it's my understanding that depreciation will be calculated separately and listed on Schedule C, line 13.  Either way, you're adding back the depreciation.

The amount of money you have available doesn't determine how much of a down payment is required, so no, even though you have additional reserves, you don't have to put that toward the property.  There may be other reasons you need a higher down payment, such as only qualifying for a smaller loan amount.

Due to the shorter work history, it will depend on the makeup of your monthly income.  Is a lot of this bonus / overtime / commission, or is it all salary?  You will need a longer history of earning those variable income types if using a degree to supplement your work history.

As mentioned above, if you truly want to buy an investment and you won't be living in the home, investment properties don't qualify for FHA loans.

 Guidelines are changing next month for owner occupied 2-4 unit properties to allow for 5% down. FHA has always been 3.5% down. Next month conventional loans will allow 5% down.

On conventional residential loans, you may be able to use a current signed lease (75%) rather than the rental income reflected on your tax returns if the property was out of service for an extended time period in the prior year. Your schedule E must support this by reflecting a reduced number of days in use and related renovation costs. The appraisal must also support the income reflected on the lease.

Additional documentation may be required to ensure that the expenses support a significant renovation that supports the amount of time that the rental property was out of service.

As mentioned above, it could be the low current value in relation to the repair cost.  

It could also be lack of experience, which is a requirement for some lenders.  

Unique properties can also be an issue.  Is this a site built home, on the grid, with a standard size lot for the area?  Unique construction homes like log homes or barndominiums or homes with acreage where most of the value is in the land are harder to finance and might not fit their criteria.  

Do they require a certain amount of reserves?  A minimum credit score?  No derogatory credit history?

To improve your chances, get a really detailed breakdown of all costs with estimates for each portion of the project (plumbing, electrical, HVAC, etc).  You'll want details of the types of finishes you plan to install (types of cabinets, countertops, flooring, etc.).

You could even provide photos or renderings of what you expect the finished product to look like to really communicate your plans.  I love boxbrownie.com - they offer photo editing with virtual renovations - https://www.boxbrownie.com/virtual-renovation.

Finally be sure to provide several solid comps to support your finished value.  Comps should be within 1 mile (closer is better), sold within the last 12 months (more recent is better), and similar in bed/bath count and square footage (within 20-30% sqft).  Unless it's a very rural area with houses very spread out, comps need to be within those ranges.  Again, if it's a unique property for the area with no comps and hard to appraise, that can be an issue for many lenders.   

You can also let them know your exit plan - either selling or refinancing. 

I just re-read your post - is the undisclosed debt the private mortgage?  Was the property listed on your loan application?

Mortgage payment history always has to be verified for the past 12 months.  Typically this is done with a credit report, but for private mortgages it's 100% standard to show 12 months of cancelled / cleared checks.  The cleared checks would be obtained from your bank account, not the private lender's account.  This is not a result of your application being flagged.

I do think it's a problem that she hasn't cashed the latest checks, because there is no proof that they were sent to her.  Anyone could write a check and have a carbon copy, and rip up the check. (I am not saying you did this, but the underwriter has no way to verify payment.)

You should have been informed of these requirements upfront, at the beginning of the process, or at the very least after your initial approval.  However if this is the undisclosed debt, it makes sense that it's coming to light later in the process.  This is a legitimate loan condition, and I think the only way to get it cleared is to provide what they're asking for, or hope your lender deposits her checks or responds to you.  She may need to complete the verification either way to document that payments were made on time (since some were cashed the following month).  Is there any way you can track down contact information for her family to get in touch with her?

There are plenty of lenders who will lend on non-warrantable condos, and each has their own requirements.  Your best bet is to use a mortgage broker who has access to various lenders.  You are unlikely to find these loans at a bank.  Buildings with structural litigation / lawsuits against the builder, particularly those without a definite dollar amount to fix, are extremely hard to finance.  Other issues may have resolved since you purchased the unit, like one person or entity owning too many units.  What is the reason you believe it's non-warrantable?

I'm not sure how the lender would trick the borrower by using the forms - they wouldn't typically see the loan documents until the very end of the process, at closing, which should be handled by a title company or closing attorney depending on the state.  If you're unsure whether a lender is licensed to do business, or following lending laws, you might want to consider getting representation to look everything over. 

If you're refinancing, the title company handling the transaction should have a payoff form that they send to private lenders to outline the payoff details (balance owed, per diem interest, etc.).