All Forum Posts by: Zach Wain

Unless there are massive property taxes in the "other costs" section of the loan estimate, it has to be the VA Funding Fee. I can not imagine how the costs get that high unless its one of the those two culprits.

@ari - sure thing.  Raised rates, I have not seen that from my lenders.  That type of presumption about the future can get a little dicey, I am surprised anyone wants to assume what rents will be in 1 year.

For the LLC item, here is the quote from the Fannie Mae selling guide "A transfer of the property (or, if the borrower is an inter vivos revocable trust, a transfer of a beneficial interest in the trust) to a limited liability company (LLC), provided that

• the mortgage loan was purchased or securitized by Fannie Mae on or after June 1, 2016, and
• the LLC is controlled by the original borrower or the original borrower owns a majority interest in the LLC, and if the transfer results in a permitted change of occupancy type to an investment property, such change does not violate the security instrument (for example, the 12 month occupancy requirement for a principal residence)."

Raymond is 100% correct on this. DTI impacts PMI, LTV of course, even borrower count 1 vs 2 makes a difference.

@Joe B. - Correct, not really, and here is some advice

First, Vacation/second homes can put down as little as 10% down instead of a min 15% for rental properties when doing a conventional loan.  Less down - correct.  Better rate - nope.  Over a year ago, Conventional loans made the rates for vacation homes and rental homes the exact same.  Previous to that, yes, vacation homes had the same rates are primary homes!  It was great, until everyone took advantage of it.

Some advice on renting it out.  If you are doing a short term rental, you can get away with vacation home occupancy if you occupy the home for some portion of the year.  This is the actual guideline from FNMA "must be occupied by the borrower for some portion of the year".  What is some portion?  NO IDEA!  There is no actual day count.  So, go use your short term rental for personal/family use during the first year and then you are good to go.

Another advantage of second homes besides rates vs rentals.  You can get an appraisal waiver with 20% down.  That can help a ton with your negotiations.

Hi Yash,

Our office is in Scottsdale and we just added a investor HELOC. Happy to run through the numbers with you.

Just a higher interest rate.  If rates drop in 1-2 years and you have a 3 yr PPP you not like the terms anymore...

@Ari Steinman - if you are asking lenders for interest rates be sure to ask interest and discount points, because interest rate is 1/2 of the equation.  If I can get a 6% 30 yr fixed on a rental, that sounds great, until I tell you its $30,000 in discount points to buy the rate.  Rate + discount points!

Any conventional loan in America is not allowed to close in a LLC. You must either close in your name or in the name of your trust. But, you can move title to your LLC immediately after closing. Fannie Mae is fine with this as long as you are the majority member of the LLC.

What downpayment are you looking at?  If you want the best deal, rental properties with 25%-30% down are getting better financing terms than 15%-20% options. 

Only DSCR loans will have PPP (prepayment penalties) and they range from 0-5 years depending on the lender and what you want. You can take a higher interest rate and select a 1 yr PPP for example. Or, maybe you want a lower rate and you are ok with a 3-4 yr PPP (which is too long IMO).

I am not sure what you mean by "supplement" to the loan after you raise rents.  Can you explain?

Super generically speaking ya, that was normal a couple days ago, a touch higher today. Primary home or rental? Credit scores? The company you work for does not impact your pricing. Loan to value, occupancy, credit scores, and loan type (conventional, FHA, etc) are the big ticket items.

Lastly - what are the origination fees?  Rate is 1/2 of the equation, origination is the other.  I can get you a rate of 4.75% but I have to charge you $100,000 in origination fees for it.  Is that a good deal?  Of course not.  Origination fees are tough to avoid in this rate market right now, but you need to be aware of them in your decision making process.

A duplex may work if you can find something sub $600k. 3.5% FHA downpayment. If you have a toddler you may not be comfortable house hacking. If the duplex does not work, see what the Condo market is like and buy a primary home. Live in it for 1-2 years and save more money for your next purchase, then convert that condo to a rental property and buy your next home.

@Michael Littleton - The 2nd home option allows you to only put down 10%, but you can not use rental income to qualify.  And, it needs to be in an area that makes sense for a second home.  Common sense.  Would you buy a vacation home 10 miles away in a similar location?  No.  What about 100 miles away?  Maybe.  Why is it a second home.  Do you have family there, is it on a lake or beach, etc etc.

Once you get at least 1 full tax return done with STR income that will help a lot. But, do yourself a favor and consult with a lender before your CPA writes everything off. CPA's usually do their job only, and save you money on taxes, but if your rental losses $30k because of excessive write offs it could make your long term goals more challening.

Text prep with a draft, discuss with your lender before filing, and put yourself in a position to win. And yes, DSCR is an option too.