All Forum Posts by: Brittany Minocchi

There aren't many, but yes. Be prepared for higher rates and/or fees on those types of loans. Feel free to reach out! 

I can't say for sure without more specific info about the properties, investment experience, occupancy %, etc....but I'm happy to take a look at this for you and see if I can find a lender willing to lend under those parameters, or as close as we can get! You mentioned in another comment that one of the properties is a 5-plex...that's considered commercial, so it would need to be done separately from the 1-4 unit properties. Feel free to reach out! 

One very important thing to note is that you won't have access to ALL of your equity. You may have $62,000....but you won't be able to use $62,000. You'll also want to figure in your new HELOC or mortgage payment into your cash flow numbers and make sure you're still good.

if it's currently worth $300k and your payoff is $238k: 

Let's say you look into a HELOC and the lender goes up to 90% LTV. That means 90% of the value will be used to determine your loan amount, so $270k. Now deduct your outstanding mortgage - you're left with $32,000 of accessible equity. If you did a cash out refinance, you'll max out at 75-80% LTV, reducing the amount of equity you can pull even further and closing costs will be higher. HELOCs have variable rates and are interest-only payments at first, then the balance is amortized. A 10-year interest only draw period is common. They are second position liens, so they don't have any impact on your existing mortgage. A cash out refi is a fixed rate, but is a lump sum loan that will replace your current mortgage (and your current interest rate).

If you can qualify for conventional on your next property, I wouldn't refinance your current one because yes, your rate will be higher. Refinancing isn't free, so you'd also need to look at your break-even point. The second property will require 5% down with conventional since you aren't a first time home buyer. If your DTI, credit and down payment are all solid, that's the route I'd take. Plus, PMI can potentially drop off of that loan once you have enough equity.....not the case for your FHA loan.

Will you still have money in the bank after the transaction? If you'll cash flow $400-$500, that's great! I'm assuming you aren't planning to live in one of the units and are doing a 25% down conventional loan? 

Louisville is a nice area! I'm about 25-30 mins away in Massillon. My husband and I bought our first house at 22 and we still say that was one of the best financial moves we've ever made, and it set us up for success. That being said - yes, I would advise someone to make the same move you're making if they were financially ready and willing to take on the responsibility. There are 25 year olds that are in a far better position to start investing than some 50 year olds. We also prefer duplexes over single-family investment properties. 

Without knowing all of the details, I'd say cashing out and paying off your HELOC since it's a safer bet - your personal home isn't on the line. But, it would also depend on the mortgage payment and rents.

I'd love to talk about the lending side of things! I'm also in OH. You mentioned moving here soon...are you planning to house hack or rent out both units?

I would start by speaking with a mortgage broker - they can take your application, gather all the docs needed and see which programs you're a candidate for. In addition to everything others mentioned above, HomePossible has income limits, so it may not be an option depending on where you live. In a multiple offer situation, conventional options typically have a "leg up" over FHA offers. FHA tends to be a better options for those who have lower credit scores and/or a higher DTI.

Hey Dylan!

I'll just be straight with you - you'll want to build your credit up a bit (aim for at least 660, but the higher, the better!) and save up more money. For a property that needs rehab, you'll start with a hard money (bridge or fix & flip) loan. That loan will cover a portion of the purchase price as well as 100% of the rehab. On a $500k purchase price, expect to need 20%+ down as a new investor. Not only are you a new investor, you're new with rehabbing properties - two things that will work against you. You'll also likely need to show reserves, covering x number of month's worth of interest payments (depends on the lender's requirements). Once the property is rehabbed and you have a tenant placed (assuming the property won't be flipped), you'd refinance out of the hard money and into a DSCR loan if you anticipate issues with your income, employment history and/or DTI. Hard money is typically a 6-12 month term, DSCR will be your 30-year product. Ideally, you'll want to have enough equity at that point to pay off your hard money loan and cover your closing costs, walking away with cash after closing (or at the very least, breaking even). I would definitely try starting at a lower price point, $500k is a biiiiig undertaking for a first-time rehabber. Best of luck!

I'm in Ohio and can help in Cleveland, but that low of a loan amount is TOUGH and won't be cheap. You'd have at least $5-$6k+ in lender fees before title fees, escrows and prepaids are accounted for.