All Forum Posts by: Brittany Minocchi

Although you're reducing your mortgage payment by living in one of the units, if you're only collecting $2,200 in rent once you're moved out, it doesn't sound like you'll be cash flowing (assuming at least average credit and minimum down payment). Around $1800 would go to just P&I without factoring in taxes and insurance. I can probably guess the area it's in based on your comment that it's a great area, and if I'm right, I'm willing to bet the taxes aren't cheap. That makes me think you'll have to raise rent a considerable amount to make it make sense. 

Another vote for the HELOC - I wouldn't give that rate up to refinance.

Why are you set on purchasing future properties in cash instead of leveraging OPM? Wouldn't it be better to spread your funds out over multiple properties instead of putting all of your eggs in one basket? 

When you say the property will be under both of your names, just to clarify, are you referring to the mortgage, the title, or both? 

Hello @Sung Won Moon!

Typically on Zillow, the address listed will be for all of the units (something like 1224-1226 Main St. for a duplex, for example). Or, it could just be one individual address if it is an up-and-down duplex and not a side-by-side. If a duplex is for sale, you are purchasing the whole property, not just one unit, so you wouldn't see a separate listing for each unit.

As far as finding deals, Zillow, Facebook and Redfin are good places to check. County auctions could be another good resource, but those can be a little more tricky (back taxes are pretty common, in my area anyway). If your area has a real estate investing group of some kind, you may make some valuable connections there. 

Hopefully that helps! PS - no stupid questions, we all start somewhere :) 

Hi Kathy! I agree with Stephanie - chances of finding a local credit union or bank that offers nonQM loans are probably slim. There are even brokerages out there who don't do nonQM loans (DSCR fall under this category). As you may already know, these loans are done based on whether or not the property qualifies, and it's not all about the buyer like with traditional loans. Income and employment history are not factors. Like Stephanie mentioned, 20-25% is the norm these days. It was once possible to find them for 10-15% down, but not anymore. Expect a prepayment penalty and higher rates and/or than traditional loans. Most lenders require a FICO of 620-640+. These requirements change all the time. There are lenders that will do loans on properties with a DSCR less than 1.25. The better the DSCR, the better the terms in most cases. Not sure if you're looking at financing a property used as a short term or long term rental, but be aware many lenders use the market value of the property when rented out on a long term basis. This makes it difficult to meet the DSCR requirements at times. Happy to connect if you'd like to discuss further.

I am in Ohio and also have buy and hold properties - happy to connect!

@Jacob Rickard if you're planning on living in it, DSCR is not an option. Properties financed with a DSCR cannot be owner occupied. For an FHA loan, you MUST live in a unit. That's the biggest difference between the two types of loans I've seen mentioned here. With a DSCR loan, a higher required down payment, higher rates and pre-payment penalties are very common. I usually recommend going with a traditional/conventional loan for as long as you can before turning to nonQM products (unless you have an issue with income, employment or DTI, then that's a little different), as they offer more favorable rates and terms.

If you/your partner have the ability to qualify for traditional financing, any bank or lender should be able to help. However, not all banks/lenders offer nonQM products like a DSCR loan.

 I know of someone that should be able to help and they’re located in Vegas, so familiar with the area. Happy to share their info if you’d like to reach out. 

@Christine Krevalin it sounds like you're moving in the right direction! My first piece of advice would be to cut out the law office, save your money and reach out to the creditors yourself. Been there, done that. Back in the day as a teenager, my husband had some health issues and ended up with bills in collections since he didn't have health insurance. We called each agency and negotiated much lower payments. If you can commit to paying a lump sum instead of setting up payments, you might be able to get a bigger reduction.

If you choose to go this route, you should ask for a pay to delete. Just because you pay off a bill in collections doesn't mean it won't remain on your credit, but if you ask for this letter, there's a chance you can get it wiped off. Also keep in mind that you're closing an account and while it's great to pay off those debts, that will have an effect on your credit score as well. This whole process will take some time, do not be in a rush. 

There are different types of loans depending on the situation. DSCR loans, for example, look at the cash flow of the property and don't require income documentation from the borrower like you'll find with a traditional loan. However, most lenders will want to see a score of 640 for this loan, and even then, your rate and terms won't be great. 700-720+ is ideal. These days, you'll likely need at least 20% down and they have more fees than a traditional loan.

You can look at conventional financing, but your income, DTI, credit, job history, etc. will all be considered. For a single family, you'd need 15% down. MFHs 25%. You can't get an FHA loan on an investment property unless you plan to move into a MFH and live in one of the units, then you can get away with FHA and 3.5% down. Don't forget to account for title fees, inspections, appraisal and other closing costs on top of down payment. I recommend that people have at LEAST another 5% for closing costs. It could be higher, could be lower, but that's a good starting point.

Credit cards aren't bad IF you use them properly. They are a great way to help build your credit back up. I usually tell people just to use it for a necessity, like gas, and then pay it down or off. To avoid paying interest, you could split it into 2 payments and still show a balance on your credit reports. For example - if you have a balance of $50, you can pay $25 before your statement end date. Then when you get your bill for the remaining $25, pay it off. This way, a $25 balance will be reported instead of $0, and it shows that you are able to manage your debt instead of always holding a $0 balance and you aren't charged interest.

Your income is good - work on a personal emergency fund and an REI fund. Don't wrap up all of your money in an investment and put yourself and your kids in a tricky situation.

Save up, get your accounts settled and work on repairing your credit. You don't want to buy a property and kick yourself because your tenant didn't pay rent, and now you can't make the mortgage payment. Or worse, your own mortgage payment because all of your money is wrapped up in your investment. Things can and will go wrong, you just don't know when, so preparation is vital. I'm happy to discuss anything I've mentioned in more detail if you need me to, otherwise good luck on your journey!