All Forum Posts by: Carl Schmitt

Credit repair companies are legal.  They don't do anything you can't do on your own.  You're just paying for them to do the leg work.  It's essentially one big technicality.  These companies ask for verification of the debt, late payment, etc.  Apparently a lot of companies don't do a great job of keeping that documentation.  If they can't provide it, it must be removed from your credit report.  Again, nothing you can't do on your own.  If you have outstanding debt on your credit report, getting them removed either through dispute or by paying them off will make your score jump pretty quickly.

Moving forward, the most important thing you can do is make sure every payment is made on time.  Keeping your utilization rate under 30% is good, 15% is ideal.  if you can pay them off in full, even better.  The key is to learn when your statement cycle closes (you can find this on your monthly statement).  This is not the same date as when your payment is due.  Whatever your balance is when the statement cycle closes is what will be reported to the credit bureaus.  

Finally, you will need some active, positive trade lines to help increase your score.  You can do this by opening 2-3 secured credit cards.  The credit limit doesn't matter ($300 is fine).  Again, make sure your payment is on time and your balance is below 15% of the credit limit when your statement cycle closes. 

I'm in a similar situation with regards to compensation. They will use all of your base salary and then add in the average of your past 2 years W2 commission. For example- your base is 50k and W2 for the last 2 years were 75k and 100k. they'll average the 25k and 50k in commission to get $37.5k. Add that to your 50k base and they should base it on $87,500 in annual income for DTI purposes.

The one exception to that is if your income has declined from one year to the next.  Then they'll use the most recent 12 months.  

I like the idea and they do look good.  However, they're 2.5-3x the price of a typical asphalt roof.  The "infinite" warranty is on the tile only.  Weatherization and power are only good for 30 years- same as an asphalt shingle.  Not to mention, warranties are only as good as the company backing them.  As others have mentioned, it's tough to grow a business on government subsidies.  When those dry up and the company folds, so does your warranty.  

@Walter Correia

It sounds like it's cash flowing well. At $320k sale price, I'd keep it.  After realtors and closing costs, you're not going to net much.  At 380k, that's a whole different story.  I guess the question becomes, can you re invest the profit and get a better return? 

@Account Closed

My understanding is that either way will give you the same result. Provided the expected income exceeds the new debt, it shouldn't hurt your overall DTI ratio. I would confirm that with your lender/broker, though.

@Account Closed

I'm trying to clarify what your strategy is.  The way I'm reading it, you plan to buy duplex A and live in 1 unit.  In a year or so, buy duplex B and move in, rent out the now vacant unit in duplex A.  Rinse and repeat.  Am I understanding your plan correctly? 

If so, my understanding is you only need to worry about the first 2 years. Once you have 2 years of rental income on your tax returns, most underwriters will consider you an experienced landlord. From there, they will add 75% of expected future rents to your DTI ratio.

For example, let's assume your DTI is maxed out. the mortgage on your new property would be $1k and push you over the DTI limit. However, you have 2 units that will rent for $900 each. The underwriter can add $1350 (75% of expected gross rents) to the income side of your DTI ratio.

@Ory Kelley

I would strongly suggest you move in.  It's mortgage fraud if you don't which is a felony.  I doubt you'll have someone knocking on your door to confirm you live there but I'm not sure I want the federal government investigating me for fraud. 

I also think you're going to run into 2 issues with your "refi to conventional and do another FHA" plan.

1- You need to make sure you have enough equity to refi (normally 80% LTV for conventional). Unless you get a great deal upfront, it's tough to go from 96.5% LTV to 80% in 6 months.

2- My mortgage broker has told me you'll have a tough time convincing underwriters that you're not using an FHA loan to just acquire another investment property. Using FHA to buy a single family, no problem. Using it to buy a 2nd multi family; that's where you'll have issues.

@Ian Skelton

First, I would confirm the rents are $650 and not $600.  At $600, you may break even, best case.  Are any of the units rented currently?  

While the deal seems average (to me), I think your cash on cash is better than you calculated. You mentioned $20k of the $52k you need is coming from a HELOC. Because you're borrowing that money (even from yourself), I'm not sure it makes sense to include that as true cash in the deal. If you take that out, you have 32k into it for a CoC return of just about 12%.

@Dominic Scheck

I haven't personally gone through the process but I've heard the same thing several times.  They're less concerned about whether you actually live there or not and more concerned about using multiple owner occupied loans to build your rental portfolio.  

I'm sure there are smaller banks/credit unions that keep their loans in house that may let you get away with it.  From what I hear, the big banks that sell their loans won't let it fly. 

@Daniel Lopez

You definitely cannot have 2 FHA mortgages simultaneously. Do you have enough equity in your current home to refinance to a conventional? I know you can purchase with a 5% down conventional but I'm not sure if you can refi that way, too. @Kit Crowne would be the guy to talk to, in my opinion.