Looking for a lending advice for primary residence/house hack

[Marc M.]

Hey BP,

I'm in a little bit of a pickle and could use some advice.  I have been searching for months for a primary residence for myself, which has turned out to be a challenge due to the competitive market I'm in (Washington DC metro area).  

I've finally found a home I really like, in an area I want to be in, at a listed price within my range, that could turn out to be a perfect house hacking scenario.  The problem is that it's a Homesearch property going to auction this weekend and is a cash only sale.  My contact in hard money doesn't want to do an owner occupancy loan and has cited (though I'm not sure this is the only reason) Dodd Frank as a possible roadblock.  

Since the bank doesn't want to deal with financing, I don't want to bid, win and be unable to close. I'm envisioning a short-term loan for a couple months while basic repairs are conducted, then refinancing into an FHA loan. Any suggestions on how I could make this work? Property needs a master bath and cosmetic updating but is in otherwise pretty good shape.

When initially discussing this with the HML, I suggested dropping interest rates to avoid any conflict with HOEPA/Section 32 requirements, and having a side agreement whereby providing them consulting fees for my blossoming real estate business. Clearly, I'm open to creative solutions.

Any suggestions would be extremely helpful. Unfortunately, with the auction happening this weekend, I'm not left with much time to sort this out.

[Chris Mason]

> My contact in hard money doesn't want to do an owner occupancy loan and has cited (though I'm not sure this is the only reason) Dodd Frank as a possible roadblock.

 He's saying it's harder to foreclose on you if you live there. 

> I'm envisioning a short-term loan for a couple months while basic repairs are conducted, then refinancing into an FHA loan. Any suggestions on how I could make this work?

Ya you tell the hard money guy you're going to flip it.

You decline to mention that you're going to flip it into your primary residence when you refinance FHA after it's in livable HUD-compliant condition, and the hard money loan is probably going to have things in it wherein you promise not to move in... those promises only apply for the life of THAT loan, they have nothing to do with future financing.

I'm not at work and do not have guidelines in front of me, but I'm pretty sure FHA will allow you to do a rate/term refinance to 96.5% LTV. Check with your go-to soft money lender, and run the entire scenario past her. I think the key word is FHA Secure, but don't quote me on that.

Honestly, it's been a while. That's what's in my brain. Go check with your go-to soft money mortgage gal with her guidelines in front of her.