All Forum Posts by: Zack Karp

@Connor Chanter we underwrite 203K loans in house, and my niche is working with investors. If you need any help or have any questions feel free to reach out.

@Amy Falson welcome to BP! I'm right near you in Gilberts and specialize in working with investors and house hackers, I've worked with dozens (maybe hundreds) of BP members on their financing over the years. Let me know if you have any questions...there are so many nuances when it comes to lending guidelines, getting the best terms, and setting yourself up in the best position possible for properties 2,3,4 and beyond as you build your empire. The Elgin area is the perfect place to start your journey, it's a very successful starter area for investors. Happy to map out your gameplan with you, feel free to reach out anytime.

Best of luck!

@Jose Ignacio Prieto

If buying as a primary, you need to be able to occupy a unit within 60 days of closing. Sounds like you are aware of that already. What I have seen successful in this situation:

1. Push the closing date to 59 days before the end of the first lease that expires (assuming you will be occupying that unit, even temporarily until one of the other units are available)

2. Have the seller offer the tenants a "cash for keys" to break one of their leases early. You might need to fund that, either with a higher purchase price, or something creative.

Otherwise, there are no other options that would allow you to qualify to buy this as a primary residence. One of the units needs to be vacant within 60 days of closing, and there is no bending to this guideline.

Best of luck!

@Jonathan Klemm thanks for the tag!

@Jacob Nevarez I agree with others here, the 2-4 unit house hack is the way to go. Some of the other financing info here is a little off though. You can buy a 2-4 unit with a Conventional loan with 5% down. Have you gotten preapproved yet to know what you can qualify for? That may determine or sway your location. Let me know if I can help you with that, I am local here and my niche is working with investors and house hackers, I have worked with hundreds of other BP members with their financing. Feel free to shoot me a DM if you want to connect.

@Christopher Morris so here's how this works. If you refinance it as your primary residence, then yes, you will be signing a new Mortgage at closing that says you intend to occupy for 12 months, essentially resetting your clock to another 12 months.

But here's the huge kicker. You can do a FHA streamline refi on an investment property, and the rate is the same as a primary. So, wait until you buy another primary residence first using the 5% down Conventional, and THEN do the streamline refi on your existing property as an investment property. Same rules, same guidelines, same rate, just no occupancy requirement.

Working with the right loan officer makes all the difference...

Best of luck!

@Teekap Pate yes this is common, and necessary in order to use rental income for qualifying. A rent schedule is a supplement to an appraisal, and usually costs $100-$150 in addition to the standard appraisal fee.

@Brandon Burch it's funny how people don't actually answer the question you were asking...

The answer is no, refinancing will not negatively affect your ability to sell, refinance, get a heloc, or anything in the future. At least with a Conventional loan, where there will not be any prepayment penalty, or any issue with having a 2nd lien behind it.

Strategically, if you are going to keep this property and want to get a heloc, then ideally you should refinance BEFORE getting the heloc. This is because once there is a 2nd lien heloc, they will need to subordinate to a refinance of the 1st lien, and sometimes that can be a messy experience, depending on the heloc lender and their guidelines.

Obviously the cost of refinancing matters too. Investment property Conventional rates are NOT 6% at par right now (no points). So to save 1% from your 7% rate with a Conventional loan, there will be some hefty cost, and it's not worth it right now, and there's no crystal ball as to when a refi might make sense financially.

However, if your current loan is FHA, FHA does allow a streamline refinance as an investment property, and the rate will be based on a primary residence rate. So you could get a 1% lower rate, but only to another FHA loan, which will also still have MIP (PMI). And you won't be able to buy another property with FHA. If that's not what your desired outcome is, do not get suckered into doing the FHA streamline refi.

So at the end of the day, you have options, but if your goal is to buy another property, it's best to walk through all your options with a loan officer who specializes in working with investors and these exact scenarios, and map out a gameplan not only for your current property and next property, but getting to property 3,4,5 etc so that you don't get stuck on your journey.

Hope that helps and best of luck!

@Edward Jung the VA loan requires 6 months of PITI reserves for the purchase a 2-4 unit property. So if your mortgage payment will be $4,000/mo, then yes you would need $24K in remaining verified assets (after closing funds, if any) to satisfy the reserve requirement. Future rental income is not able to be used.

Keep in mind that retirement assets (401K, IRA, etc) are eligible towards reserves, and so are any other investment accounts.

Rental income is only used towards the income portion of qualifying, not towards assets.

Hope that helps. TYFYS and best of luck!

@Paul De Luca thanks for tagging me in

@Veronica Mitchell did you get this sorted yet? If not, feel free to reach out. Some lenders are more conservative than others when it comes to contract employees. FHA does not have a clear definition in their guidelines, but most lenders have stability standards, depending on several factors (contract length, previous employment, etc). Happy to look into it if you still need help.

@Nicholas Halterman to answer your question, is it worth putting money down on a VA loan, the short answer is...it depends.

The answer differs whether or not you are just buying 1 home, or planning to house hack. And it also depends on whether you are disabled or not.

If you are just buying a home to live in and not invest, then I believe it's best to put at least 5% down if you can, since you won't need to save money for future down payments.

As a general rule, as an investor, cash is king. The less you can put down on any property, means more capital for future down payments.

For a VA loan, if you are not disabled, there is a funding fee that the VA charges. Now this gets financed into the loan, you don't need to pay it out of pocket. But it's still a real cost. The funding fee on your first property with 0 down is 2.15% of the loan amount. If you put 5% down, this lowers to 1.5%. Not a huge difference, but again money is money. But on any subsequent properties using your VA loan, with 0 down it's 3.3%, and with 5% down it's still only 1.5%.

Wait what, you can you use your VA loan more than once? Yes! More on that in a minute.

Because it's only a 0.65% difference on your first property, IMO it makes sense to put 0 down. But on your next property, you can certainly make the case that by putting 5% down you are saving 1.8% in cost.

The interest rate is the same either way, whether you put 0 down or 5% down.

And I am a HUGE fan of getting seller credit to cover your closing costs, that is something you would include in your offer(s). With a max seller credit, you can actually get money back at closing. The right loan officer can calculate all of this for you and set you up for success not only now but for future properties too.

And as I mentioned, you can not only use your VA benefit for 1 property, if your purchase price is low enough, you will have secondary/bonus entitlement to buy a second property with a VA loan. Again, getting with the right loan officer can help you plan these numbers so that you don't have surprises later.

Now, using the VA loan twice isn't as important anymore, now that you can do 5% down with a Conventional loan for a 2-4 unit. But if you want to buy 2 properties with 0 down, and save your money for property #3 and after, then that part is critical to make sure you don't overspend on property #1 and not be able to use your VA entitlement for property #2.

Hope that helps! TYFYS and best of luck!