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Updated almost 2 years ago on . Most recent reply

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4
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2
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David Marino
  • New to Real Estate
  • New Jersey
2
Votes |
4
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First Time Loan and Eventual Refinancing

David Marino
  • New to Real Estate
  • New Jersey
Posted

Good Evening all.

Been a little while since I posted last with a question in the "starting out" section.  Since then I have been trying to do my research so when I do start I make a smart decision on my first property.

I've narrowed down my first goal is likely to get a multi-family so I can house-hack.  I need to move closer to my new job and, to be frank, it would be nice to move out of my parent's house.  

However, my job is located in Northern New Jersey (Linden) where the prices are approaching the "out of budget" levels - at least with a turnkey property.  So it seems like a rehab might be on the cards.

I've been listening to podcasts, trying to read in my spare time, and started going to REI meetings. But I'm still confused on the getting financing portion.

Can you get a traditional loan to finance a BRRRR? My understanding from some of the people I've spoken too and what I've heard is banks don't like to go a traditional route on distressed properties. But on the other hand, to get a non-traditional loan it is preferred you have some kind of proven track record on these types of properties - which I clearly lack.

So the question is - how should I go about getting pre-approved for a loan? And if I can secure a traditional loan on a BRRRR property, can I refinance it later on once I have put some forced appreciation into a property? And where should I be looking for these loans?

This also feels like a bottleneck since I don't have any kind of pre-approved loan I don't have an interest to use to calculate the mortgage payment and run the numbers on any properties I might be interested in.  

These are probably pretty simple questions - which is why I haven't jumped into anything yet since it's still over my head.  But I'd like to learn so that I understand the process, can then at least get a pre-approval, and then can at least start practicing running the numbers on prospective properties - even if I'm not ready to buy - so I will feel more confident in myself and the numbers I ran when the time comes to pull the trigger.  

Thank you to anyone who is able to help!

Most Popular Reply

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65
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36
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Peter Vander Valk
  • Lender
  • Bloomfield, NJ
36
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65
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Peter Vander Valk
  • Lender
  • Bloomfield, NJ
Replied

I would highly NOT recommend hard money or DSCR for this. Hard money is more geared toward people who are fixing/flipping or fixing/refinancing into a purely rental property. DSCR is meant for people who can't qualify based on their personal income. First timers can use these, but these products have high associated costs and aren't meant for your primary residence.

For an owner-occupied primary residence that needs renovation, FHA 203(k) loans are the way to go at 3.5% down, or Fannie Mae Homestyle Renovation loans if you can qualify conventionally and have 15% or 25% to put down on a 2 or 3-4 unit property respectively. With these loans, you can borrow money toward the renovation and there is no refinance required. You can do a rate-and-term refi in 6 months or a cash-out refi after a year.

So long story short, if I were in your position, I'd look into the 203(k) loan. 3.5% down for a multifamily is a great way to get into house hacking your first property. I'm happy to chat further if you have any questions. Feel free to shoot me a message. And whatever you decide to do, best of luck!

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