All Forum Posts by: ALLEN KEYS

@John Beese Congratulations and welcome to the site! The Lake County Property Investors Association (LCPIA) meet on the second Tuesday of each month at 6:30pm Inside Laws resturant (near the corner of Grand and Milwaukee Ave). They also offer a "beginners" class that starts at 5:30 at the same location. I provided a link below.

http://www.meetup.com/Lake-County-Property-Investors-Association/

Thanks for the advice everyone!

@ yes, this is my first time using this lender. @ I was considering ordering the appraisal in spite of her advice then she informed me that her bank would not approve my loan if the appraisal was low...... But I will take your advice and order the appraisal any way.

Thanks!

Allen

My lender wants me to increase my agreed upon (signed contract) offer by $11k. A little background.... I have a signed contract between me and Fannie May to CLOSE at the end of this month (Jan 2014) on an REO property with an agreed upon purchase price of $31k. I also have a contractor willing to do the requested rehab for just under $35k which is the max allowed for a Home Path property*. (*$35k is allowed if the property appraises over $100k).

Long story short, the lender called my real estate agent for her best guess of what the ARV (after repair value) would be once the rehab is complete.... Her answer was that the property would be worth about $67k.

With that information, my lender informed me that they cannot finance a property that will appraise for less than $60k. Therefore, she suggested that I contact the seller (Fannie Mae) and tell them to increase the purchase price from $31k to $43k..... and contact my contractor to scale down the amount of rehab from $35k to $21k in order to get the loan approved....

Her theory is that if the appraiser "sees" that I purchased the property for $41k, he or she will most likely say that the property is worth more than $60K.....

I'm new a this real-estate investing thingy but that just doesn't seem right. Has anyone else heard of, or been in this situation?

Thank you in advance for your advice.

Allen

Hello Brendan,

I'm also new to the investing community so I can't speak to which option is better for you, but I can inform you that the minimum FHA loan has increased from 3.5% to 5%..... Good luck! I hope this helps you in your decision process.

Allen

Congratulations Dennis! I wish you all the best!!!

@Account Closed

@Bryan H.

@Rod Smith

@Kabir B.

@Deborah Burian

@Naveen Desai

Thank you ALL very much for your well wishes and accolades.... Bryan, Naveen yes, I did use the Fannie Mae HomePath Renovation loan. I discovered the Homepath loan on the Fannie Mae "Homepath" web-site (http://www.homepath.com/?t=1380676785734&success=true).

Since I am not planning on living in the property, I had to come up with 25% of the total loan amount. But, if you are planning on living in the property, you are required to put down 5% (it was only 3% prior to Nov. 16,2013). The loan amount includes the total purchase price of the property and the total renovation costs.

The web site also provided a list of approved lenders (click on the "financing" tab, then "find a lender" tab). After that, I just chose two banks from the list that was closest to my house in an effort to compare rates and build up a relationship for future purchases.

One huge thing I've learned so far... it is MANDATORY that you call and speak with the lender if you are unfamiliar with them as I was.... The first lender I spoke with was qualified to issue the loan, but didn't have any clients that actually used the loan, therefore they lacked the experience with the process... it was very noticeable when I asked a few basic questions and he would say "I'll have to get an answer on that and call you back".... When I spoke to the second lender, it was apparent that this was his thing. He offered tons of "unsolicited" information concerning the loan process. For example, his bank requires that the property must appraise for a minimum of $100,000 after the renovations are complete. He also emailed me a list of unpublicized fees that I would be responsible for near closing time on top of the 25% down payment such as:

Loan Fees
Application Fee: $350.00 (due at time of application)
Processing: $498.00
Underwriting: $195.00
Appraisal: $350.00
Flood Certification: $11.50
Credit Report: $27.50
Tax Service: $57.00
Rehab Fee: $500.00
Total Fees: $1,989

That would have been a $2,000 headache if I would have found out about these fees on the day of closing.... I also had to provide them with proof of income (two check stubs), my social security number (they ran my credit), then they provided me with a pre approval letter to submit to Fannie Mae. I hope this information was useful!

Allen

Wow, I thought this day would never come..... After three months of negotiating with Fannie Mae, I feel great knowing that I am now going to be an "official" investor. My closing date is set for Jan 2014 and I can't wait to get started remodeling and marketing for tenets.

Since I'm using a Home Path loan, I was surprised to discover that it was sort of a challenge finding a contractor willing to accept the job.... I would say that out of the ten contractors I called only three of them were willing to view the property. I must say, that my contractor search took place PRIOR to me getting the signed contract from Fannie Mae.

So, I figured that they (the contractors) were not taking me seriously and decided to hire a company to conduct a feasibility study. I think it was worth it ($400) because after informing the contractor that I had the report is when those three contractors responded. Of course they wanted me to email them a copy of it first.

In hind site, I would do it again, because from the contractors perspective, they could be wasting their time if I have absolutely no money involved or tied up in the property (a tire kicker).

So, that's where I'm at so far in my process, and thanks to everyone on this site for contributing helpful information!

Allen

@Abdenour Achab Thanks a lot for the "quick tip!" I just downloaded it also.

@Peter Karasseferian Great advice! Thanks, I really didn't think of that... I will call for a rough estimate, subtract the difference from my original offer and propose it as a new purchasing price. I'm not sure if that would be too aggressive (revealing that I'm a motivated buyer) but it's worth a shot if I want to move forward and not waste time... You're right requesting to get into the property at this time would be awkward considering the current situation. Again thanks for the advice!