All Forum Posts by: Zack Karp

@Jonathan Klemm thanks for the tags!  @Moises Correa and I already got the ball rolling :)

@Account Closed

First off, there is no difference in underwriting time between a VA, FHA, or Conventional loan, or a SFD vs a 2-4 unit. As long as the LO/lender knows what they are doing.

Ok time for some next level stuff...

Strategically, if you are looking to house hack several properties, there ABSOLUTELY is an order in which you should utilize your financing, so that you don't get stuck. The reason is due to each of the different lending guidelines for Conventional, FHA, and VA, and how you need to qualify for each subsequent property.

You should use FHA first. The reason is that when qualifying for a future property with FHA, in order to use rental income to qualify from the vacating property, there are guidelines.  First, to use income from the unit you are vacating, you would need to relocate 100 miles away.  And to use income from the other units, you would need to pay for a new appraisal on that property to prove that you have 25% equity in the property.  Pretty tough to gain that much equity in 1 year unless you're doing a major rehab.

Then use VA second. Also this helps because in order to use rental income from the other units to qualify for a VA loan, you must have prior landlord experience. So having a property under your belt satisfies this. (There also is a workaround that you can hire a property manager to satisfy the landlord experience).

Then use VA again third. Wait, what? Yes, you will have secondary/bonus entitlement, and be able to use VA again, without having to refinance that last property out of VA. The max amount of this property will depend where you buy, and how much entitlement was charged on the first VA loan.

Now, you will have 3 properties and up to 12 doors under your belt, in a little over 2 years if you house hack each year (you need to occupy the property for 1 year to satisfy the primary residence terms of your Mortgage).  By this time, hopefully you have done well, and you will have a lot more options...

Then for the next property, you can buy a SFD with Conventional with 5% down. Or perhaps one of your first 3 properties did well enough that you have 25% equity in one of them to refinance to Conventional, and free up your FHA or VA eligibility again. Or perhaps now you have saved up enough to put 25% down on an investment 2-4 unit with Conventional financing.

Hope that helps :) You have a very unique opportunity as a Veteran with the VA loan. Mapping out this strategy can be the difference between one-and-done, and a successful run at real estate investing. This is the difference of working with a LO who specializes working with investors and house hackers.

TYFYS and best of luck!

@Jaziel MaldonadoRoman using FHA first is actually a smart move strategically. Check with your TSP administrator to see if you can withdraw the funds (even with penalty), and then deposit some or all of the funds back within 60 days to avoid the penalty. That would be the best move. To your question, if you don't withdraw the funds, then it can be used to satisfy your reserves, if required, but cannot be used for down payment unless liquidated.

Then save VA and Conventional for future properties, there is a very strategic reasoning for the order in which you use your financing, as far as qualifying/guidelines.

TYFYS and best of luck!

@Aubrey Laflamme VA and FHA loans are only for a primary residence. Investment properties would need to be Conventional or some other non-QM loan product. For a 2-4 unit investment property, Conventional requires 25% down. In order to have a low down payment with VA or FHA, it would need to be your primary residence.

Hope that helps.  TYFYS and best of luck!

@Jackson Vasey this is called the BRRRR method. Buy, Rehab, Rent, Refi, Repeat. But here's the catch...you cannot have more than 1 FHA loan at a time (unless you relocate 100 miles away).

So if you buy with FHA and put 3.5% down, in order to refinance out of FHA into a Conventional loan, for a 2-unit it's 85% max LTV and 3-4 unit max 80% LTV. And that's if you refi as a primary residence, and starting a new 1-year clock. Otherwise if you refi as an investment property, it's 75% max LTV for a 2-4 unit.

Kind of changes things a bit, huh? So you would need to create anywhere from 11.5% - 21.5% equity in order to do the "Repeat" of this BRRRR method. Which is why the Rehab part is essential to this method working, because without forcing appreciation, it's pretty hard to gain that much equity in 1 year.

There is also another loan product called Home Possible which is a Conventional loan that allows 5% down on a 2-4 unit, as long as your income is below a certain cap (depends on geographical area of the property). The great thing about HP is that it allows you to buy another 1-2 properties with a low down payment in addition to FHA, as long as you can stay under the income cap.

The most critical thing to using any of these strategies is to align yourself with the right investor-friendly loan officer so that you don't get stuck. Without the right advice, you might have just gone and bought that first property with FHA, and then found out later that you couldn't just buy property #2 with FHA.

If you want to map out a strategy that pertains to your situation, I'm happy to discuss further, feel free to reach out.

Best of luck!

@Paul I. 6 months but it sounds like you're already past that

@Paul I. the Conventional loan limit just went up to $647,200 for 2022, you might want to consider cash out refinancing again and pulling more cash out that way, instead of putting it into an adjustable rate heloc with the Fed already preparing for a lot of rate hikes the next 2 years.

@Kerry Baird First Midwest is 75% LTV, 1st position lien only.

Might be helpful to note on your list whether it's 1st lien or 2nd lien position.  I would guess that 90% of the people asking for an investment property heloc are looking for 2nd lien position, while less than half your list likely allows a 2nd lien position heloc on an investment property.

But this is a great list, super helpful!

@Andy Ronquillo if you are preapproved for a $100K single family, but then also only preapproved for a $100K 2-4 unit, then you need a different loan officer.  Clearly they weren't using rental income to qualify you on the 2-4 unit.  You should be approved for a much higher price on a 2-unit than a SFD, and then higher on a 3, and even higher on a 4.

Sounds like you need to get that part in order first, you might be making a terrible mistake because of an idiot LO that didn't preapprove you properly.

Best of luck!

@Christian Fregoso for that small of savings, it's probably not a great move. You also need to factor in the cost. Not only the closing costs, but another upfront mortgage insurance cost (UFMIP). I don't know your numbers, but it likely would be better to refi to a Conventional loan and drop the mortgage insurance. If you're not at 80 LTV yet (75 LTV if this is an investment property), my guess is that you'll be there soon the way the housing market has been increasing.

Bottom line is that on the surface saving $100/mo might sound good, but overall I am going to guess that the cost won't be worth it.  Happy to break it down further if you need an unbiased set of eyes from a mortgage veteran.

Best of luck!