All Forum Posts by: Brittany Minocchi

Quote from @Luke Mertz:

@Brittany Minocchi What changes when the college town is 100+ miles away?
What if you only ask for 1 FHA loan, does that change anything?

That’s a stipulation when you’re applying for an FHA loan and you already have one - the second property has to be 100+ miles away, you need another property because of a growing family, etc. It just has to make sense to the underwriter and be clear that it’s not someone trying to take advantage of the system or commit occupancy fraud. If your first loan is conventional and the second is FHA (or the opposite), you’re good. 

Are you saying you'd have one duplex at home and one where the college is? If so, and you plan to use FHA for both, you'll have to meet certain requirements. If the college town is 100+ miles away from your hometown, you may be okay. Generally to be eligible for FHA, you have to move into the property within 60 days and plan to stay there for at least 12 months. If you're there for 3 over the summer and head back to school in the fall and try for another FHA loan, that may not fly.

Using an FHA loan to house hack is definitely a great option to get your foot in the door (pun intended)! You can do it with a conventional loan as well, but the down payment will be higher. I would suggest sticking with a duplex to avoid needing to worry about the self-sufficiency rule that FHA loans have for 3-4 unit properties. Also, pay attention to how long the seller has owned the property - FHA has rules around flips that can complicate things. You'll want to plan on occupying a unit for at least 12 months. After that, you're free to move if you'd like. Keep in mind that if/when you decide to move and get a mortgage on another property, there will be stipulations in order to qualify for another FHA loan and you may need to go conventional on that one.

Feel free to reach out if you have any questions I might be able to help with. Best of luck! 

Hey @Jacob DeLorge! Here are some things to consider - 

For a flip: 

1. Are you paying cash or applying for a loan? If it needs rehab, are you financing the work yourself or adding it to your loan amount?

2. Do you plan to do the work yourself or hire it out? Don't forget to give yourself wiggle room with the rehab cost - many investors underestimate how much time and/or money they'll have wrapped up. 

3. Do you know how to pull comps for the area or have an agent to help determine your ARV?

For a rental: 

1. Will the 75%-100% of the rental income be equal to or greater than the monthly principal, interest, taxes, insurance, and HOA if applicable?

2. Are you looking for a single family or multi-family property?

3. Assuming you plan to use financing - are you looking for a conventional loan or something less paperwork-heavy? 

4. Do you plan to occupy the property at any point? (more common with a short term rental property) 

My advice on where to start will be different for a flip vs. a rental as the loan types are completely different. Once you get it narrowed down, if you'd like more guidance, feel free to reach out! Always happy to help. 

Yep! I do them regularly, as long as there was enough rehab completed to justify using the appraised value over the purchase price. If the properties are in NY, you might run into issues there though. 

Yep! 

Not all lenders require a lease in place, especially for a purchase vs. a refi. However - if it needs rehab in order to be livable or has any sort of deferred maintenance, it won't qualify for a DSCR loan. You mentioned that the ARV wouldn't be significantly higher once the work is completed, so it sounds like you may just be talking about cosmetics, in which case you should be fine. :)

Conventional financing won't be an option for a property that needs rehab UNLESS you plan on living in it. 

For strictly an investment property, you'd start with a bridge loan (fix/flip or fix/hold). These usually have a term of 6-12 months and are interest-only. The lender will finance a portion of the purchase price and up to 100% of the rehab. As a new investor, you could need anywhere from 10-25% of the purchase price to put down, as well as reserves (x number of month's worth of payments available in your bank account). You will need to find the rehab to start, then request draws as work gets completed on the property to reimburse yourself. Once rehab is completed and before the balloon comes due, you'll refinance into a long-term loan if you plan to hold, or you can sell the property. DSCR loans are popular for this because you can get around the 12 month seasoning requirement that a conventional cash out refinance will require.

Hopefully that helps a bit, feel free to reach out if you need me to elaborate on anything! 

Hey Xiang - 

If the property is free and clear, a DSCR cash out refinance is probably your best bet in order to keep it in the LLC. You'll see better rates and terms with a cash out refi vs a line of credit on an investment property, and many (not all) lenders want the property to be titled to an individual and not an entity. Depending on credit, LTV, etc rates in the 7s for a cash out are pretty common right now, whereas you'll likely see a line of credit run somewhere around 9-10%+.

Hey Erwin! 

Are you planning to do an FHA rehab loan? Will the property need rehab in order to be livable, or do you just mean cosmetics when you say rehab? FHA appraisals are on the strict side, so depending on the condition of the property, a "regular" (non-rehab) FHA loan may not be feasible. FHA loans are 30-year mortgages....it sounds like you may be thinking you need a fix and flip/fix and hold type bridge loan and then plan to refinance into a longer-term loan, but those types of bridge loans are for investment properties, not owner occupied.

You will need to get your credit pulled, but the affect the pull has on your credit score should be minimal. It tends to have more of an impact for folks who have scores on the lower side, but even if you do see a drop, it should recover within a few months. I wouldn't go applying for auto loans, credit cards, personal loans, etc. while you're applying for a mortgage - THAT will drop your scores. DTI will be a factor whenever you're applying for traditional financing, so your income will need to support any debts you take on. (I keep saying traditional financing because there are investor loans that DON'T look at DTI, but you can't use those loans for properties you are occupying).

Also worth noting that if you want to refinance and pull cash based on the appraised value, you'll need to wait until you've owned the property for at least 12 months for conventional financing. 

7s with no points for the most part, but it ultimately depends on LTV, loan amount, FICO, your investment experience, how long you've owned the property, whether its a single family or 2-4 units, whether it's leased....not all lenders care about everything I listed, but just some things to consider!