All Forum Posts by: Brad Sneckner

Hey @Kevin Nguyen, I concur with Jayson here. Exactly how much you're able to cash-out of the property really depends on the value and current mortgage (if any) on the home. As an investment property, you're able to pull out up to 75% of the value (minus any existing liens) if it's a Single Family Residence, or up to 70% on a 2-4 unit property. This is just under standard conventional guidelines. There are other loan programs that have different guidelines (usually more strict) that can be explored if any challenges arise. 

You'll want to discuss this first refinance with a local SoCal lender for specifics. Once you have that cash, if you will still be using financing on the next properties out of state you would work with a lender licensed in that state (if the original lender wasn't).

I hope that's helpful! Let me know if any part of that explanation sparks further questions for you. Cheers!

@Kerry Baird DSCR loans are FANTASTIC for investment properties. For those unfamiliar, DSCR stands for "Debt Service Coverage Ratio." It's basically a program built around the idea that if a property is bringing in enough rent to cover the total payment, then it's a no-income loan. There are some specifics to how rents are calculated, and what the rates will be, but it's a great program (even allows cashout). You'll need to have substantial equity to pull cash out though (30%+).

@Kevin King That can be a reality, but usually everyone is looking for/at the same things. If you're working with a banking institution, then they might be only offering you "portfolio products," meaning it's their own loan product and they determine all the details, guidelines, and requirements for their own loan program. 

However, the vast majority of mortgage lenders are either a direct lender (like me) or a broker. And while they have ACCESS to some portfolio products, the majority of what we are working with are standard guidelines from Fannie Mae, Freddie Mac, FHA, or VA. And those guidelines are the same for every lender in the country if they are going to sell that loan to the respective agency (this is probably 90% of all originated mortgage loans in the country). So Complicated answer simplified, MOST of the time lenders have the same guidelines/requirements as every other lender, and it's just a matter of how knowledgeable and "plugged in" the specific loan officer is.

Hope this helps. And yes, I am in SoCal as well!

Hey @Kevin King, it sounds like you're incorporated, is that correct? This sounds like a lender that isn't particularly adept with self-employed borrowers, to be honest. You don't need "consistent" income throughout the year. I have clients that basically just pay themselves 100% via their K-1 and that is the income we use to qualify them. We just divide it by 12 months (or 24 if we're doing a two-year average of two K-1s) and then move on. We don't see whether those K-1 distributions were monthly, quarterly, or even once per year as a single lump sum. We just see the total, and it's not a problem. 

There may be other particulars in your scenario that change the answer but I don't see why it would be a problem. Paying yourself a salary is not necessary, although it does sometimes make the calculations a little more favorable.

Let me know if you have any questions about positioning yourself well for the next property.

I would encourage you all to look closely at your trust deed. If you are refinancing as a primary residence loan, the specific verbiage is typically that you will occupy it as your primary residence WITHIN 60 days (applicable if you not CURRENTLY living in the property), and then that you will maintain it as your primary residence for at least ONE YEAR. It is not "fair game" after 60 days. Whether or not you actually get caught renting it out right away and have the loan called due is a different question. But when you close the loan you are signing a trust deed stating specifically:

"Borrower shall occupy, establish, and use the Property as Borrower's principal residence within 60 days after the execution of this Security Instrument and shall continue to occupy the Property as Borrower's principal residence for at least one year after the date of occupancy, unless Lender otherwise agrees in writing,"

(The above is literally copied and pasted from a trust deed on a Fannie Mae loan). Read carefully my friends. 

Hey @Jorge I. Pimentel! You didn't mention explicitly, but I'm assuming you're looking at purchasing this next multi-family as a primary residence since you mentioned the FHA option, is that correct? If you were purchasing it as a rental, you would have some other options. For example, one product I've used for clients in the past is basically only using the rents of the property as "income" on the property. Essentially, if the property pays for itself, it qualifies. This is NOT a standard conventional mortgage though, so you'll need to be prepared for a higher rate. This is a great option for investment properties when in your specific situation. The other thing you could consider is to take cash out of your free and clear rental house using this product, and then use that money to help make the purchase of the new property as a primary residence.

The need for a 2-year history is not necessarily always applicable either. If your brother can show he's making at least as much now as he was when he was an employee, then he can probably be fine with just a 12-month history with the business. 

Hope this helps you! Feel free to reach out if you have more questions. 

Hey @Ben Morrow, I think you've got some great options in the list @Kerry Baird provided, so I would definitely consider that. However, I also second what Michael said about rates likely going up. I'm a lender in California and rates have spiked dramatically in the past couple of weeks. I would not advise planning on a dip back into the same 2s and low 3s we've had. Especially on a cashout, investment property, and when you're trying to borrow as much as possible. 

That being said, I think there is still a great opportunity to deploy that equity on another purchase if you have enough in the equity. It might be helpful to talk specific numbers here to calculate your return. This is a common plan of action for investors, and one thing that MANY of my investor clients initially miss in their calculations of this scenario is the COST of not purchasing the next property. When you're calculating return, I think it's important to step back sometimes and review the return of your whole portfolio at a 30,000 ft level. Sure, you might be increasing the cost on these two SFH investments, but what are you GAINING with the purchase? It's hard to accurately quantify this but if you're looking at multi-family I think it's probably going to make sense. There's now a COST to KEEPING your current rates by not refinancing and purchasing the Multi-family.

Just something to consider. Hope that's helpful.

Hey Victor! Very exciting that you're looking to make the move into homeownership! Are there any specific questions you have? Or just looking for a high-level overview? 

My buddy Cristian Ojeda is amazing. He specializes in more complicated tax strategizing type stuff rather than just simple W2. I'll message you his contact info.

Nicely done! You guys have a great design eye. It's a great style to compliment the Redlands charm as well.