House Hack Financing Question

[Justin Morris]

Hi BP,

My wife and I are looking to house hack a property in Saint Pete, FL. We want to buy a duplex, rent it out, then move back in and fix it up. We've talked to a conventional FHA lender and we've got some work to do on the credit to get an approval. I am considering going the private money route and purchase a property through that route while we work on the credit/pay down debt so our DTI is better and we can get approved for more, then refinance in a year.

During that year we’d rent/Airbnb the duplex (we’d only be buying a duplex that needed cosmetic Reno as it’s our first property). and live abroad to save $$ then come back and refinance the property as our primary residence. My questions are:

1. Is this a good strategy?

2. Is there private money lenders out there that will do 100% financing that aren’t crazy expense with points and high interest.

Thanks.

[Andrew Postell]

@Austin Sine the truth here is that you COULD run into a DTI issue. However, if you also have a stable job with that good credit and no debt....and the lender is still saying that your DTI is too much...then you need a different lender. It sounds weird but not every lender will approve you the same way. So how do we know what lenders are good? Referrals certainly help. Smaller lenders are USUALLY more flexible. But even with those there still MIGHT BE some roadblocks. So I created a list of questions you should ask any lender you interview to see how flexible they really are. Here's the list:

Questions for Lenders

1. When do you start using rental income to help me qualify? (the answer needs to be immediately)
2. When do you start using “After Repair Value” on my property?
3. How long do you need me to be on title to refinance? (this is important if you do need a short term loan to purchase then refinance out - and the answer should be 1 day...very important that it is 1 day on title is all that is needed to refinance)
4. What is my minimum down payment required? (if they only require 15% down on a single family home that is usually a good sign that you are working with a flexible lender)
5. How many loans can I have with you?
6. Can I change title to my LLC?
7. Do you sell your mortgages?
8. What is your loan minimum?
9. Can you explain to me what your reserve requirements are?

Hope that helps!