All Forum Posts by: Aaron Chapman

Rates are on the charge up...I am locking many of the investors I am working with in the high 5's with 20% down. I had locked my personal investment in MO at 6.125% in the last week with another lender (I  am the only licensed originator in that state with my firm so I cannot use my firm or I would have). The quantitative tightening is taking its toll. 

@Michael Dunn it appears that you are experiencing the same thing that happens to many who work in the lending industry. The guidelines for Conventional, Govt, Non-Agency and Portfolio loan products blending together. There are so many guidelines for so many programs that a lenders office can look like a law library if they chose to print and bind each program independently.

The initial statement referencing the loan amount being restriction to not exceed the initial purchase price is as indicated above based on the "Delayed Financing" program. When one pays cash for a property they are restricted to the maximum loan not to exceed the price of the home. In those scenarios one would be hard pressed to get any improvement costs back on the property unless they were able to work that into the price of the property with the seller.

As far as being able to pull the cash out of a primary residence at the time of purchase, you are being directed correctly to talk to a local bank to see what they can convince their board to approve as most lenders are not wanting to take on that much risk up front. For those that follow the standard lending guidelines they will provide you the following. Conventional guidelines restrict cash out to 80%. FHA has restricted it to 95% (based upon FNMA and FHA program matrix). This Loan to value is based on the appraised value after the specified seasoning period or period of time one must have had ownership.

Having said all this, there are many other factors that must come into play for any loan to be approved. In an effort to keep this post from going too long, the best plan of action is to speak to a very experienced lender and allow them to review your entire financial package as none of us lenders can give complete accurate advice without receiving full voluntary participation of a borrowers financial information.

The question is best answered by the terms of the owner financing. If it is in fact better than the conventional, then the choice may be to go that way. With respect to the limit on financed properties, a lender will do research and see that there is a property in your name. If in that search a lein for that property pops up, it can be considered a financed property. A detailed review with an investment focused lender would be a benefit for you.

The information above is accurate that different banks have different requirements. When I am qualifying a client who is in a similar situation as yourself I am able to use the 75% rental income that is indicated on the "operating income statement" provided by the appraiser. As long as one is purchasing a property with a solid cash flow their debt to income ratio goes down with each purchase. 

If one is buying an additional within a short timeframe, they will have to have a lease agreement on the previous one to use its income. The appraisal on the previous one can only be used at the time the loan was being completed. I can't speak to every banks policy, but I can say from my own personal experience as an investment property lender. My clients are not being held to a timeline of receipt to count the rents received on any if their properties no matter where it is in the line of 1-10. 

Of course there are many details that would require you to have a personal conversation with a lender as it relates to your specifics. 

Retirement accounts can be used as long as you can prove that they have some accessibility in the case of a need for early withdrawal. I am required to have my clients provide the "terms of withdrawal" for the retirement accounts we are using to satisfy the reserve requirement. There are very rare occasions that the participants in the plan have agreed to their funds being held in an account with absolutely no access unless they have reached retirement age or leave their place of employment. In those very rare cases we cannot use that specific account to fulfill the reserve requirement.

Most accounts have an accessibility with penalty and taxes associated with early withdrawal. Since that is the case most lenders who will accept this as a valid reserve account will only allow a percentage of the current value to be used . To account for potential market fluctuation as well as the above listed results of early withdrawal we use 60% as the factor with the investors we sell the end loans to.

What state is it in?

Many of my clients are working with sellers who have the rehab cost built into the purchase price when planning on using the 'Delayed Financing Option" offered thru FNMA. With that one can finance up to 100% of the acquisition cost with some LTV limitations depending on whether it is properties 1-4 or 5-10. With respect to financed properties 5-10 this is a good way to continue cash out with potentially a higher leverage capability over strait purchase. As @Upen Patel stated you cannot do cash out past 4 financed properties any other way but delayed financing with Conventional loans.

 You are correct. Many do not count it unless it is on your taxes. I met with many firms before I settled on the one I hang my licenses with now. They will count proposed income on a New purchase based on the appraisers rental income statement and will use lease agreements when the property does not appear on your Schedule E. If you would like to chat, we can schedule a conference call for tomorrow

I close dozens of loans every month for clients up to 50% DTI. 45% is well within range. In addition each casflowing property you add, the lower your DTI goes in the calculations I am able to use for qualifying.

My personal philosophy has always been ellimination of debt is the best investment. I am however very curious what DTI are you coming up with when you figure in the net rental income on the out of state property you are looking into? Also what figures are you using to come up with that end number?