All Forum Posts by: Christina Zimmerman

Hey, all.

We are getting back on our feet this Wednesday, July 20th at SouthSide Garage. This will be a general meet & greet while your new hosts learn the ropes. Come out and enjoy some networking and good food. Looking forward to seeing you, there!

https://www.meetup.com/the-rea...

Hey, BP Community.

I had this idea a while ago, and I'm not sure I've heard anything quite like it before. It's kind of a weird twist on seller-financing. I'm hoping I can get some advice on potential pitfalls that I may not be foreseeing, as well as advice on how to handle the pitfalls I do foresee mentioned at the end of the post. 

Here's the situation: I have a good friend of mine who can qualify for a mortgage, but does not have the money for the down payment or closing costs. As opposed to renting another year, I had the idea of gifting her the down payment money while she remains the sole borrower on the mortgage, but both of our names are on the deed. The friend will live in the home and be responsible for the mortgage, and I will help finance half or all of any repairs/updates needed (provided they are not boujee updates and completely necessary). When she has had enough time to save up for a house of her own, she will quit claim the deed to me, I will take over the mortgage payments, and I get another house for 3-5% down at an owner-occupied interest rate without being on the mortgage. This way, she gets to live in a house of her choosing (provided we both agree on the deal) for the cost of the mortgage, only, allowing her to save money on rent, and I, eventually, get another house with little money down, appreciation, and equity built-in from the friend paying the mortgage while living there.

Potential pitfalls I see and will make sure are worked out legally, upfront:
1. Can I write-off these gift down payments for tax purposes?

2. How can I get their name off the mortgage so they can qualify to buy a new home while keeping the original financing terms? (I know there are seller-financing strategies for this which I need to research further)

3. Should I have a 2-5yr term limit for when they would have to quit claim the property to me in entirety and either move out or start paying market rent?

I know I would need to make the terms of this deal as clear as possible legally, including what updates would be financed by me as well as how long the friend is allowed to live in the home. Obviously, I wouldn't want to tie my capital up forever, and would eventually want this to be a cash-flowing asset.

Let me know your ideas! Is this a flop or a gem of a strategy?

TIA!

@Allan Ouellette I was told either 12 months of PMI payments or 6 months to refi. I'll probably just let it go. I had just refinanced and was able to change my loan value, so I guess I made the assumption that that's how it would work with purchases as well. The more you know! Thanks

@Jesse Rivera I like the way you think

Hey, all.

I am under contract for $165,000, and the appraisal just came back at $178,000 (you CAN still find deals, people!). I am purchasing as an investment property and putting 15% down, so I have a $50 PMI payment in addition to the mortgage payment. With the new value, that 15% equity turns into 22%, and I *thought* I could get the mortgage insurance dropped. My lender told me that's not how it works, and that they still have to calculate based on the purchase price, not the value, so I can't get my PMI dropped until 12 months of payments, OR I can refinance.

I don't want to spend the money to refinance, but may reconsider because I could technically pull a little cash out and potentially drop the payment due to dropping off the PMI.

Does anyone know another way around this? Sucks I can't just have it dropped as the loan hasn't closed yet and we close on 10/8.

Thanks in advance!

@Joe S.

This is a common misconception among buyers- because they pay for the appraisal report they assume it belongs to them. Unfortunately, the lender is the appraiser’s client as they hired them, and the lender can do what they wish with the report. Nobody is legally obligated to provide it to you. Ive never had an issue from my lender receiving it, though.. Weird that they are withholding it. It’s typical for them to share it with the borrower. Id just keep asking your lender for it or to at least provide an explanation for why you can’t look at it

Thanks everyone for your responses! Lots of insight

Hello! I am going to give a quick run-down of my situation to see if what I want to do would be considered mortgage fraud or finessing the system

I bought property 1 in 2019 and lived in it for 1.5yrs. I fully rented it, qualified for another primary residence loan and bought a second property (new primary residence) in Feb. 2021 and house-hacked.

As we all know, residential properties have appreciated significantly. I knew that I had equity in property 1, but, now that it was considered an investment property and cash-out refinances were capped at 70% LTV, it wasn't quite worth it for me to refinance property 1 as an investment property. Unfortunately, in May 2021, my dog was attacked by my tenant's dogs at property 2, and my 1st property happened to be vacant at the time, so I was able to fully rent out property 2, move back to property 1 and cash-out refinance property 1 at 80% LTV as my primary residence. A dog attack was a legitimate excuse for moving primary residences so quickly in the eyes of the bank, as it was a safety issue.

With the money I pulled out from property 1, I am looking to buy another property and currently have one in my sights. This is the current situation:

I will purchase property 3 with 15% down as it will be an investment property. I will be doing significant rehabs to it (estimated time to complete 2-3 months), so, in order to save some cost on labor, expedite the process, and generate cash flow, I plan on moving in to this hypothetical property 3 and fully renting out property 1 (although I just refinanced it as my primary residence on 7/21). After I rehab property 3, I will refinance to recoup some of my out-of-pocket costs. Since I will be living in it, can I refinance it as a primary residence 2-3 months after financing it as an investment property and 5-6 months after refinancing property 1 as my primary residence? I know the general rule of thumb for banks is to lend on a primary residence 1 year prior to the last loan, unless there is a legitimate excuse like moving to a different city/state, becoming pregnant, etc.

All of these are legitimate moves that I've made, albeit very quick. I'm am trying to hustle!

In short, would refinancing property 3 as a primary residence be an option for me (where I can pull out 80% of equity and take advantage of lower rates vs 70% of equity as an investment property and higher mortgage rates)?

Here's a timeline of my financing:

8/19 Purchased Property 1 as primary residence

11/20 Fully rented property 1

2/21 Purchased Property 2 as a primary residence

5/21 Dog was attacked by tenants dogs at property 2, moved back to vacant property 1

7/21 Refinanced property 1 as a primary residence

Theoretical Timeline:

9/21 Close on property 3 as an investment property

12/21 Refinance property 3 as primary residence

I hope this all makes sense. Just trying to cover my *** and make sure that this would be a legitimate move and not something that looks fishy. I will actually be living in property 3, after all, just less than 1 year after my last primary residence loan. Worst comes to worst, I refinance property 3 after rehabbing as an investment property and pay the higher rate/get less cash out.

Thanks in advance for taking the time to read and answer! Any and all advice is appreciated, even hypothetical situations I have not discussed (like potentially HELOC property 3 post renos?)

Hello!

I've got an investment property that I bought in '19 that has appreciated significantly- I have approx. $50k of equity just sitting there, and I've been trying to find a way to access it. Here is a run down of my current situation:

I bought my first property with a conventional, primary-residence loan. I fixed it up while renting out a room until I saved enough money to purchase the next property. I fully rented my first property and bought my second property, again, with a conventional, primary-residence loan. 

As time passed, my first property has appreciated significantly. I originally wanted to do a cash-out-refinance to pull out some of that equity to use as a down-payment on my third property, but my lender informed me that the cap on cash out refinances for investment properties is 70% of the home's value, and, after closing costs, it is not worth it for me to go this route: (Property Value $155k * 70%) - Loan Balance $105k = $3500 accessible (before considering closing costs). In addition, if I refinanced, property 1 would now be considered an investment property, and I'd have to pay a higher interest rate for an investment property.

Now, I'm exploring the HELOC option. My condo (property 1) is vacant for the next two months, as my current tenants have just moved out, and I have plans to move some friends in when their lease ends at the end of July (they are paying me a fee to hold it for them that long, no worries). My understanding is that I can't get a HELOC unless it is on my primary residence. Would it be legal/would the bank buy it if I moved back into the condo for the next two months, fully rented out property 2 which I've only owned/lived in for two months, went through with the HELOC process, and used it as a down payment for a third investment property (since I can't get another primary residence loan for at least 10 more months)? I was told you can get up to 85% of the equity  as a line of credit: $50k equity * 85% = $42,500 credit available towards a down payment on an investment property. I've already got tenants living w me in property 2 that have agreed to pay the full rate once I move out. Also, our dogs don't get along, so that could be a valid reason to give the bank to move out and back into my first property?

Here's my question boiled down- can I move back into my first property, get a HELOC on it, and use that line of credit as a down payment on another investment property? I would have to move back out of property 1 at the end of July, either to live w my parents, or into my new, hypothetical investment property. So it would be a 2 month stay, at the longest.

If there are any other creative ways to access this money, please let me know. I've moved a million times the last few months, but I'm just crazy enough to do it again for access to another $40k, if it makes sense, legally. 

Your time and thoughts are much appreciated. Just trying to get to the next one!

Thank you!

@Charles Carillo Thanks for your input!