All Forum Posts by: Amy Lee

@Amy Lee The plan you described is full of holes and challenges but yes you're on track. At the most basic level your #1 goal should be buying distressed as low as possible, maximizing every dollar you have for the rehab, and getting a strong appraisal. "Hoping the reno added equity and I have at least 20%" - You can't hope anything... you need to know the market numbers (ARV, rehab budget, etc.). Without this information you can't refinance and make the strategy work in your favor. I wouldn't even waste your time. SFH, duplex, tri, it doesn't matter. Every property has a market value when it's shiny and "new". Know these numbers before you make offers.

When I started out I did something similar. 3% down, conventional loan, distressed, bought off the MLS. It was a live-in flip and I house-hacked with my brother. It was a win-win. Rehab budget was $20k. I blew $9k on the roof! We learned a lot, increased the property value, used some hammers, vetted and hired contractors, and after a 6 month seasoning period I refinanced the property. That was in my entry into homeownership.

If I can do if you can too. Follow the numbers not your emotions! Cheers. 

Amy,

FHA is only good if you need to put less than 5% down and have less than perfect credit. If you can afford to put 5% down avoid FHA if you have a credit score above 680. FHA caters to those who need to put less down (3.5%) or have lower credit scores (580 to 699) or have lower income where it causes you to have a higher back end ratio usually above 49% and less PITI reserves. If you have to go FHA you need to choose a Big bank one that is Fully Delegated which means has little to no overlays. FHA is the exception if you want to buy a 2-4 Unit as a primary because its only 3.5% so there is a benefit on that scenario.

Most Lenders/Brokers charge points or have to hit their "loan officer compensation plan" AKA bucket. That means they get paid a percentage or "commission" and have to charge a higher rate to get paid. When you work with an FDIC Bank or Credit Union they are not allowed to charge points on Ginnie Mae/FHA/VA/USDA loans. You also do not want to have multiple lenders/brokers pulling your credit you want to narrow it down to (2) options.

There is also "No haggling" with a true bank or credit union fees are set based on fair lending standards. If a lender or broker cuts costs or fee's that means they are breaking the rules and overpriced. When most lenders offer a "Quote" they cannot actually offer you a true rate quote unless you ask for a 30-60 day Locked LE "loan estimate". That would require a full application and a credit pull but it’s a "Locked offer".

If you are not getting a "locked LE" your basically window shopping or getting a "teaser rate" which means the loan officer/broker is giving you the 5 "Day close rate". You cannot close on a day rate meaning close in 5 days. Bankers, Lenders, brokers can see what is known as the 5 day rate which means if someone wants to float and lock 5 days out from closing they can get the lower or best rate.  That 5 day rate is used a lot to offer teaser quotes instead of the actual 30 day lock rate pricing.

Avoid anyone who works at a call center, does not have a team and does not pick up your calls after hours or weekends! Banker hours are for people who are not devoted to their agents and customers.

@Matthew Hetrick the thing to keep in mind is that you aren't really shopping for anything special on the loan itself. Pretty much all lenders can do the same loans generally speaking with FHA. Instead, you are looking for a lender who knows investing and who understands all the ways to make your deal a winner. As a realtor, I have an amazing lender that I both use personally and who I refer to clients. I always cringe when the clients end up with some major bank because I know the lender on the other end making $20 an hour will have no idea how to get the deal done if it gets complicated.

One thing you can do is ask the lender about self sufficiency for 3 and 4 units. If their eyes glaze over then they don't know anything about house hacking with an FHA loan. Also, ask them if you can use a 5% down conventional to buy a 3 or 4 unit. This was possible last year, but is 99% impossible now due to recent changes but I still run into lenders who don't know about those changes.

Hey @Amy Lee - you should check with the property manager of your apartment complex as there should be a way to buyout your remaining lease. TYPICALLY, you need to give a certain amount of notice and pay a certain portion of the remaining lease. 

With an FHA 203k you should be able to live in another dwelling as the renovation is being completed, but you will need to talk with your lender / mortgage broker to figure out what that would look like as it will likely vary depending on scope of work!

You mentioned renovations - are you planning on an FHA 203(k) or a "regular" FHA? They are very different.

@Amy Lee I need to provide some clarification on your post if you don't mind.

1. Downpayment - there is no 5% downpayment using a conventional loan with a 2-4 unit property.  A few years back there was, but there hasn't been that option for a while now.  So your options using a conventional loan are 15% down with a duplex as your own primary home and 20% down with a 2-4 unit property. 

2. FHA Rules - now FHA has this rule called the "self-sufficiency" rule on 3-4 units properties. This rule basically states that the rents have to be OVER the mortgage payment. And since rates are so high right now, and properties are so expensive, satisfying the "self-sufficiency" rule is next to impossible. And that means no FHA loans on 3-4 unit properties right now. This is an economic environment problem that will not always be around but be aware of this. Keep in mind that this does not apply on duplexes.

I know that was a lot but feel free to ask anything additional.  Thanks!