All Forum Posts by: Andrew Postell

@Shawn Tompke this is not a normal type of transaction. Fannie Mae, Freddie Mac, FHA, USDA loans all have very specific rules concerning this. It might be best if you could survey off the mobile home onto a separate plat of land. Then you will have every loan option at your disposal. Good luck!

@Jordan Butts CASH IS KING.  The more cash you can have at your disposal is normally the right answer in Single Family investing.  What if you buy a home with a large down payment and then another great deal falls in your lap the next day?  Having more cash helps you when you are fortunate enough for that to happen.  Also, for a conventional loan you can do 25% down but you can also do 20% down or 15% down.  Talk with your lender about what the impact would be if you want to take advantage of a lower down payment but it is possible.  Thanks!

@Joe Swanson the process you are explaining is right on. It sounds like you are on the right track. Just a couple of pointers, if you are refinancing into a conventional loan after the construction work is completed then the maximum the conventional loan can refinance is 75% of the After Repair Value. So if you owe 76% of the ARV to the loan and rehab work just expect to bring a little to closing type of thing. I would also recommend to start the conventional refinance the day after you purchase the home. Sometimes a refinance could take 45 days and if that happens here then it should work out to refinance out of the construction loan right after the work is done. That way you are not paying them a day more than you need to. Great job and good luck!

@Rohan J. the concept of a mortgage is based on a collateralized loan - meaning you need an asset (the house) to lend the money against.  To lend without an asset would be considered an unsecured loan and there are loans like that out there.  They will naturally be a higher rate and a lower amount but they do exist. 

Also, once you get into the discussion on 5+ unit properties that's outside of what I specialize in.  5+ units would be considered a commercial loan.  If you want to ask that in a separate post use the appropriate terms in the subject lines and you should be able to get some good responses.

Thanks!

@Benjamin Voorhis This is a very common challenge to most investors.  Conventional loans have very specific rules concerning cash out loans on investment properties.  Conventional loans are the loans governed by Fannie Mae and Freddie Mac (if you recognize those names).  Conventional loans are the loans that give us the most favorable terms; 30 year fixed rates, no prepayment penalties, the lowest rates, etc.  There are two very important rules that apply to cash out investment property loans when using conventional money (portfolio is different and we will address that later):

1. If you purchased the property with cash (or a HELOC) then you can get your initial investment back (purchase price) + closing costs OR 75% of the After Repair Value...whichever is the lower amount.

2. if you purchased the property with a small loan, and then used cash to do the repairs, then you are limited only refinancing the loan balance in the first 6 months of ownership.

However, for portfolio lending these rules don't apply.  Well, what I mean is that portfolio lending is up the the bank itself so the bank may or may not have these types of rules (I've actually seen portfolio loans that don't allow cash out at all).  But portfolio loans will carry a higher rate, have a shorter payback period, be an adjustable rate, etc.

The method that most investors use to refinance is to wrap the repairs into the loan so you don't tie up any more money than you need to.  Hope this helps.

I will private message you.  Thanks!

@Account Closed there are portfolio loan products that will qualify either based on the cash flow of a specific property or based on your assets.

The "Cash Flow" type of product ignores all taxable income.  It is based solely on the cash flow of the property.  Since these are portfolio loans they will be slightly different dependent on the lender but some will approve the property with $1 of cash flow and some will adjust your downpayment based on the cash flow (so the more it cash flows the less your down payment).  

The "asset" based loan again ignores all taxable income and bases your income on an amortized amount of your assets AFTER you purchase the home.  So after your downpayment is taken to purchase the property.  If you are refinancing this isn't applicable.

Also, even a conventional loan will use rental income to qualify you.  It's important to get to know a lender that is an expert at lending on investment properties to help you best.  Some portfolio loans will have loan minimums, etc.  Maybe even a broker might be a good choice.  Private message me if you need help with finding a lender in your state.  Hope this helps!

@Jason Pavloff these are very common questions and I can provide you with the correct answers:

1. If you purchase and occupy a duplex then you can do 15% down with a conventional loan. If you purchase and occupy and 3 or 4 plex then you would need 20% down with a conventional loan. If you do not plan to occupy the property then you will need 25% down for a conventional loan. If you were to use an FHA loan then you can use a lower amount but you can't have 2 FHA loans in the same area. You need to have a job transfer that would move you out of commuting range for the 2nd FHA loan. You can have different ratios with portfolio loans but those will have higher interest rates or other features that are not as favorable as a conventional loan.

2. What you are being told here is absolutely a lender overlay.  An overlay is an extra rule that a lender will add to the guidelines to have a more conservative approach.  The reasons why lenders do this is too time consuming to explain but the important item is that you need to find a lender who doesn't have this overlay because you CAN use your rental income to qualify. 

3. Reserves are always important for conventional lending.  If you do need 6 months of reserves (sometimes you may only need 2 or 4 months) then it's 6 months of the mortgage payments...not the rents.  Also, retirement assets can count as reserves.  Some banks have overlays attached to this reserve condition so look for a lender that does not have overlays and you will be better off.  

4. Cashing out your primary residence is limited to 80% of the value of the property if it's a Single Family Residence.  If it's a duplex it's 75%.  That is a conventional lending rule (not an overlay) but you MIGHT be able to find a portfolio loan product that does differently.  

Let me know if I can help in any other ways.  Thanks!

@Michelle Romano got it now. That sounds like a good turn time on work.  You had me concerned there for a minute.  Let us know if we can do anything else to help.  Good luck!

@Chimi Changa (nice name by the way) 15% on a "conventional" loan is what you should expect if you are going to live in the property on a duplex.  If it's 3-4 units then expect 20% down on a conventional loan.  And that is if you live in it.  Conventional loans are the loan types with the lowest rate, fixed rate, etc.  They have the best terms on the loan itself.  A portfolio loan on a duplex, tri-plex, or quad may have a lower down payment but I have not seen a portfolio product on a multi-unit have that.  Usually portfolio loans are more flexible on the qualifying part of the loan but they normally require a higher down payment, higher rate, etc.  Since there are literally 15,000 banks there could be 1 that has a different approach but I have spoken with many, many banks on this subject and not found any portfolio loan with a lower down payment requirement.

@Gordon Way what you are experiencing in a lender "overlay". An overlay is an extra rule that a bank puts on their loans in order to be more conservative. I can explain why they do this but it really doesn't matter. What does matter is refinancing under 6 months at ARV is entirely possible.  I'll Private Message you now.