All Forum Posts by: Neil Sinha

*bump*  Does anyone in the know (mortgage brokers or originators) on the forums have the reference that shows why an appraisal can be used for rate and term refinance prior to six months, but cash out triggers the requirement that purchase price only be used for property value until seasoned?  I haven't been able to understand why simply paying one loan principal with another allows the underwriter to get a new appraisal value faster.  I would assume the same logic of "purchase price indicates fair market value if the parties are arms length" would hold for a rate and term.

@Brian Garrett any chance you have the link to the thread? I've been doing everything I can to study up on the refinance portion of the BRRRR strategy because it seems like there's limited options to move with velocity:

1. HML (with down payment in most cases) for purchase plus rehab, which then can be traditionally refinanced out of the loan portion, but if you brought cash to closing, that can't be returned unless you season six months

2.  Cash purchase and cash rehab, which you can get traditionally refinanced out under six months with delayed financing, but your rehab expenses can't be returned unless you season.

3. Obtain some form of creative loan where all your cash in the deal is recorded off the settlement statement and is negotiated by you and the purchase lender. You then rate and term out of that loan, and the original lender returns your funds. That seems to need either creative HML (not all of them have a product that will put your down payment into a vehicle it can come back to you), or using an entity such as mentioned in this thread (which is a new trick I hadn't seen).

Still, understanding what the hard-written Fannie Mae rules are that allow rate and term faster than cash out would be good for my learning so I know why #3 works.

@Rashad Luckett, that's an interesting approach to lend from your own entity to yourself to make it a rate and term instead of delayed financing. Can you talk about how underwriting on the traditional lender handles the mortgage? Have they looked at what original purchase price was or that the loan they're taking out was ~150% LTV at closing? Or they don't care, they just see you have an existing principal balance for 67K and want a loan from them for 67K and thus the original transaction is irrelevant? That's the piece I'm trying to understand, particularly if anyone on the forums has the insight on why Fannie Mae makes traditional loans hold firm on purchase price as value for six months if there's cash out, but will order a new appraisal value if you're only paying off one loan with another.

One question I've had on rate and term: I've seen traffic on the forums that if you are not taking cash off the table at closing, you don't need seasoning and can rate and term the next day.  But doing my own perusing of Fannie Mae documentation, I can't see where it specifies that.  So, with @Naveen Kumar's example, if you purchase an off-market property in an arm's length deal at 100K and have a 90K mortgage, but with some sweat equity and a month's work, an appraisal could peg it at 120K, will you be able to have that appraisal ordered and rate and term out of the purchase loan at 75% LTV? Or will they insist on purchase price under six months even if you're not taken cash at the closing table? I know the traditional answer is that any bank can have overlays that would preclude it, but it would be good to know where's the reference / citation saying it's not Fannie Mae's policy.

@Kim Winger - There are multiple threads on BP with extremely dissatisfied customers of Morris Invest.  Definitely recommend you do a search and read before you consider investing your business with them.

Hello BP! I'm continuing to D4D in my farm area and one vacant property was foreclosed by one of the local credit unions about 4 months ago. Does anyone have tips on making a fast offer direct to the REO team? Or do they usually sit tight until they get an agent to list it on the market for full retail value? Didn't know if credit unions handle REO different than the big boys.

@Elvin Reyes almost all banks that originate mortgages resell them to Fannie Mae.  What @Jason D. is referring to is that some banks have rules or "overlays" that are more restrictive than what Fannie requires by their policies.  So, if the bank you're talking to stops the cap at 4 properties, look for another one that doesn't have the additional restrictions.  There is a breakpoint at that fifth property and how much in reserves you need to keep on hand to continue to qualify, so do some google searches on Fannie Mae property limits.

@Kat Malkowski I would check your 401K plan document about a loan against that balance.  Typical IRS rules are you can get a loan within a few percentage points of prime for the lessor of half the balance or $50K.  If you are able to purchase on cash terms you get with that 401K loan, you can then consider a Delayed Financing Exception refinance.  That is where you get a conventional 30 year mortgage for a property you paid cash and that has no liens against it.  Do some searches on both 401K loans and delayed financing here on BP and it will give you more information.

Andrew's opinion seems to be the trend here on BP: amortize over 30 years and overpay as desired.  It will shorten the term but allow flexibility should you hit unexpected bumps.  The reduction in rate from 30 year to 15 year period seems not to matter to most people here in the forums, particularly since interest expense is deductible.  Also, make sure you're including relevant vacancy, maintenance and capital expense reserves in your cashflow analysis; not just debt service.

I agree with the principles in the post, but I think the content is fairly generic and "fluff"y. I find there's way too much aspirational / motivational content in the REI community and not enough concrete discussion of lessons learned, good and bad examples, etc. Maybe that was pending for part 2 or 3, but I'd have to ask why wait to get to that? Is it to promote click bait? If so, what does that say about the blogger's own brand? That they don't value their readers' time, or that they think a reader doesn't intuitively grasp what a brand identity is? If the reader clicked on the title, they likely have a foundational grasp of what branding is and are looking for help building their own. Just my 2c.