What is the best loan structure for this strategy?

Question

I am in the process of finding a lender to finance a buy, rehab, and rent.

Generally, what is the best loan structure for this strategy?

What are the best questions to ask a potential lender?

Thanks!

Matthew Porcaro · Answer

@Christopher Grant

If you can live-in it for a little while you can do a live-in flip using a 203k loan.

If don’t intend to, you can use the Fannie Mae Homestyle on single family homes that are non-owner occupied.

You can get your renovation costs wrapped into your mortgage, and only need 15% down compared to some HML’s that require new clients to put at least 30% down.

Obviously the Homestyle isn’t cash, but your terms will be better.

Nick Riccio · Answer

@Christopher Grant I would say often times, people use a rehab loan (203K or conventional renovation product) to pull off something like this.

I've done it in the past via FHA and paying the renovations in cash, and then refinancing into a conventional.

I would make sure they understand what you're trying to do - that is the biggest piece

Brad Hammond · Answer

Hey @Christopher Grant, if you are going to keep this loan for a long time (not refinance after 3 years) you will want whatever the lowest rate is.  Also know that if you or going to occupy it and get an FHA loan, you will need to pay PMI for the life of the loan!

When looking for a lender, find one that is responsive to you, has low-cost loans, and can get you the best rate.