All Forum Posts by: Daniel Hennek

Investment property 4 unit with 70% LTV cash out and 740+ credit can get you a convention loan for 3.375% at ZERO points APR 3.483%. So take that point away and drop the rate 1%. So no that's not what "Fannie Mae rates" are right now. For some lenders yes they are that bad with pricing but that's pretty much the top of the range, which means the least competitive. If you can't find something better than 4.375% for a point then maybe you have 680 credit? I re-ran my search with 680 and it would be 4.375% with no points, APR 4.412.

This is not an advertisement, just quoting rates from my pricing engine to help ya'll out.

Come on!  Bad ad dude!

Your max CLTV is going to be 97% for a conventional loan. That is 97% of the purchase price or appraised value(whichever is less)...see a problem there?

You have a person here who you claim is "in lending" but they don't know how to calculate the dollar amount for their maximum CLTV? I'd call that a red flag and you should be looking for red flags if you're thinking about loaning anyone money, secured or not. Maybe it's simple ignorance, ok but that's actually not ok if you want this to work and not just waste everyone's time until someone who knows better gets a hold of it. I'll help lay out some example numbers for you so you can understand what I'm getting at.

Let's assume for arguments sake a purchase price of $200,000 with an appraised value of $170,000.  

For the FHA she was going to bring 3.5% probably right? So $7,000 down and a base loan of $193,000 before the FHA UFMIP. So she was ready to bring 7k out of pocket. Let's convert this to conventional now using her available $7,000 down.

$170,000 appraised value means a maximum 1st mortgage at 97% LTV of $164,900 leaving $35,100 she still has to come up with to pay you your $200,000. Apply her $7,000 down and she still needs $28,100. So how is she going to come up with this $28,100? She thinks with a 2nd mortgage note? That would mean a first mortgage of $164,900 at 97% LTV, a second mortgage at $28,100 for a total combined amount of $193,000 and a CLTV of 113.5%. Now use your actual numbers to see what proposed CLTV you're looking at. Remember, maximum CLTV is 97% so you're dead in the water at anything above that.

You're trying pretty hard to help this person, which is admirable but not pragmatic. You should think about why lenders won't make large un-secured loans, and or who they'd make those loans to. Most borrowers looking at an FHA loan are doing so because their credit doesn't allow them to get better terms with conventional, or they simply can't qualify for conventional period. If you're thinking about giving these people an unsecured loan wouldn't you at least want to qualify them? Look at their credit? Ask them to make some attestations to statements of fact? If they were FHA buyers then it's a pretty good bet they wouldn't get a large unsecured loan from most, or any banks. The people that can get a large unsecured loan from a bank don't look at FHA loans.

Life happens to people.  When life happens to them do you want that to automatically trickle down to you?  The thing that normally prevents people from passing off the fallout from their hard life events onto others is security...that's why it's called security.

Sell it to Opendoor then, or hand over $30k to these people you want to help so badly.  There's nothing you can do to help them buy the place so stop trying.  You can't write a second note to cover this because the loan product will not allow it.  Here's the guidance below:

All second liens must be made or held by the eligible governmental body or instrumentality.

Second liens cannot be delegated to another party that is not permitted to provide this level of secondary financing.

There's nothing to do about the appraisal unless you can find higher value comps that weren't used but should have been. The buyer has to bring more money since their LTV is going to be based on the appraised value or purchase price whichever is less.

There is also the possibility that your appraiser didn't do the right time adjustments.  There's been guidance going out to appraisers all over the nation about getting better with their time adjustments because too many values are coming in low.  So maybe you can get the appraised value increased if there are legitimate mistakes made on the appraisal report, but it's a long shot.  

One thing you might have to do is come up with actual return to work date.  There is the chance that you don't return to work.  If you are not able to work right now the underwriter is going to need assurance that you'll be able to return to work someday.  This is a very unique scenario so talk to someone in depth about all of your details, someone who knows to ask the right questions.  This WILL come up and they do have a right to ask about it when you sign documents giving them permission to ask about it, and that's exactly the type of stuff you'll be agreeing to in a loan application package.

Another piece of advice, don't conceal facts that could be deemed material in nature and always be honest when engaging in a large transaction like a mortgage.  One thing you said that was a red flag to me was using quotes with second home, and then not using them with investment property.  There are no "second homes".  The 3 categories are:

1: Second homes - Places people use for dwellings part of the year and leave empty the rest of the year, or maybe let friends and family use it for free.

2: Investment properties - Rentals, Air bnb, you use it for 3 weeks and rent it the rest of the time...

3: People trying to commit occupancy fraud by saying an investment property is a "second home" because they know it gives them a better rate.  

 No offense meant Caroline, but what you said didn't make sense.

You can get a non owner occupied loan from a bank, retail mortgage lender, specialty mortgage lender, mortgage broker, or credit union.  They all work with loans securitized by the GSEs (Fannie, Freddie, Ginnie), but few work with loans outside that box.  Being able to sell to the secondary market (Fannie, Freddie or Ginnie) doesn't make any lender special, it's pretty normal.  Though you're right about the person at the bank having only one option.  

Banks are the lazy person's choice for a mortgage.  You want to go sit with a person who knows less about mortgages than you then go to a bank.  You want to have a single option with rates for captive customers not willing to shop around, then go to a bank.  You want someone who does everything including the kitchen sink then go to a bank.  You want a specialist then pick a specialist.

A broker works with many lenders.  They work with lenders that also have retail branches but they can take your loan somewhere else if it makes sense to do so.  

Jon Kelly is speaking in terms of the most efficient use of that money and that's where my mind goes as well.  The money today, IF put to good use is worth more than the savings of tomorrow.  If you don't know how to use that money then put it down for the better rate.  If you do know how to use that money to do something with it then use it elsewhere.

This is a question nobody can answer as well as you can.  You know how good you are at managing your money.  Which situation will you be better off with...

Seems to come down to what I suspected with the wording interpretation.  I appreciate the confirmation.

Please enjoy some Portillo's for me!  Maybe some Lou's also...

Thanks again 

Zack, I was just talking to an underwriting manager and I brought up delayed financing while I had her on the line.  She kept insisting that the rehab cost will not be included in the calculation for the maximum loan amount.  The maximum still being purchase price plus closing costs.  This is an underwriting manager at a large institution and I pressed her about this.  Your confidence in your post makes me doubt her, which is why I'm asking you for more details.

The way it's written in the Fannie selling guide I saw an opening for rehab costs to be included because the words used were "borrower's initial investment in purchasing the property" instead of just using "purchase price" when explaining how to calculate the maximum loan amount.  But, as I said this underwriting manager insisted the maximum loan amount would be based on the actual purchase price not including any rehab cost regardless if it was on the CD.  

So have you actually closed a similar scenario as this before with a maximum loan amount calculation including rehab costs under conventional guidelines?  If so, how are we wrong about our interpretation of the guidelines?  Are you using Freddie and there's a difference?  I didn't check Freddie on this.  More feedback would be appreciated as this seems to be an issue many people have different takes on, and since I obviously am unsure of the true reality I'd like more information.  If you're saying you've done this before under conventional guidelines, please indulge us and share the details we're missing.

Sounds like what Zack is saying is that the phrase "borrower's initial investment" in the Fannie guide is the allowance for the rehab costs.  I'll admit I just learned something.  Thanks Zack.