All Forum Posts by: David Cherkowsky

Hi all, I'm interested in thoughts on creative financing options for an Airbnb in Northern Virginia. A property is available off market that seems to be a great deal. I am interested in living in the basement, and renting out the upper unit on Airbnb. The property is likely a little too expensive for me to qualify for with a conventional loan based on DTI. However, I'm wondering if anyone has thoughts on creative financing. Maybe a DSCR loan? Any thoughts would be appreciated.

0 Votes

Washington, DC

Quote from @Greg W.:

Try both Old Glory Property Construction and Oakwood Builders.

I'll give them a call. Thanks Greg!

0 Votes

Washington, DC

Hi all, I am looking for any contractor recommendations for installation of a bathroom addition in Alexandria VA. Earlier this year I reached out to a handful of contractors and was ghosted by most of them after a few emails or in most cases, after they came to view the house in person.

If anyone has recommendations, it would be greatly appreciated.

Thanks!

0 Votes

Washington, DC

Quote from @Patrick Roberts:

Quote from @David Cherkowsky:

@Brittany Minocchi, @Patrick Collins

I have owned the rental property since June of 2024. So I do not have a tax filing with the rental income on it yet. I was told that I have to use the lease value * 0.75 until there are two years of rental income. Then I can use the rental income from my tax return.

I talked to the one lender and said that I have no interest in buying down the rate on the FHA with points.

The DTI however does not work unfortunately with the conventional with a lower down payment I am being told.

For Conventional, you can only use 75% of the gross rent until you have Sched E history for the rental for a net rental income analysis. Also, you will likely only be able to use the rent to offset the mortgage pmt debt on the rental property to $0 since you dont have any Sched E history yet.

For FHA, I would ask your lender to confirm that they considered the 100 mile rule in calculating DTI. I've seen lenders miss this and blow up loans on several occasions, and Im getting a little of that vibe here.

Thanks Patrick. I will ask that. I appreciate all the help and info.

0 Votes

Washington, DC

Quote from @Lexie De Stefano:

I like this train of thought and think you should aim for option 3: conventional loan + lower downpayment (perhaps even lower than 10%). Your lender definitely should be able to count the 75%- I'm in Arlington and would be happy to connect you with my awesome lender who has been able to do all kinds of creative options to get to yes for me. For context, downtown Alexandria performs super well as a rental market and bringing in $5.5k+ as the monthly rental income if you choose to move out of the househack in the future will be absolutely feasible (depending on the property of course). Therefore, bringing as little to the table as possible at closing in both the downpayment + closing costs should hopefully still make your numbers work. Best of luck!

Thanks Lexie. Just sent you a DM.

0 Votes

Washington, DC

@Brittany Minocchi, @Patrick Collins

I talked to the one lender and said that I have no interest in buying down the rate on the FHA with points.

The DTI however does not work unfortunately with the conventional with a lower down payment I am being told.

0 Votes

Washington, DC

Quote from @Chris Seveney:

Have you confirmed you can rent the basement. I believe Alexandria city allows it but portions of Fairfax county do not allow it.

i would go option 1 personally.

Hey Chris, yes I confirmed with the city. Spent an hour talking to the Land Use Services Division Chief and a representative from Code Administration. Was able to receive in writing that I am good to rent the basement. It was tricky because the basement ceiling height is not quite 7'.

From what I have read online, Fairfax limits STRs to 120 days per year, so it would not be feasible. Luckily this is in Alexandria city. Right in Old Town.

And thanks for the input on the loan. I am leaning towards option 1 as well. I think it makes the most sense.

0 Votes

Washington, DC

Quote from @Patrick Roberts:

I think the big question is how badly do you want to keep the extra $50k liquid? In option 1, all but $10k goes into equity in the property. In option 2, your costs are $25k higher. Also, it's likely that a slightly smaller amount of each payment will go toward principal since the loan balance is higher and the rates are likely nearly the same once the MI of 0.5% is added to the rate. Overall, you're spending $25k in extra costs and a monthly pmt that's $500 higher to keep $50k in your bank account.

There's a decent chance that if you have good credit and improve your DTI over the next year, you can put a Heloc on the property while it's still your primary to unlock some of that equity if needed. Many local banks/CU's will go to 85% CLTV.

Thanks for the input Patrick. I don't need the $50k liquid. Guess I'm looking to make the best decision with the money. It seems like it probably makes sense to use it for the down payment.

I also do like the idea of a HELOC in the future.

1 Vote

Washington, DC

Quote from @John Burke:

Not necessarily that you'll have to bring money to get the LTV down but you will have closing costs on the new loan that you should be able to roll into the new loan.
Do you have other debt that you can pay off to get your DTI under 50% instead of putting 20% down?

The other debt is a rental property that I do not have two years of rental history on. I am being told by these lenders that I need two years of rental income included in tax returns for them to not use 75% of the rental income per the lease.

Essentially no other debt that could help reduce the DTI.

0 Votes

Washington, DC

Quote from @John Burke:

Quote from @David Cherkowsky:

Hi All,

I am purchasing a home to house hack in Alexandria VA. I have two loan options, and I am interested to hear thoughts between the two. They are very different, which is making me struggle with comparing them. Purchase price of the home is $800k.

Option 1

Conventional loan

20% down: $160k

Points: 0

Cash to close: $170,092

Rate: 6.875%

PMI: $0

PITI: $5004

Loan Amount: $640k

Option 2

FHA loan

10.625% down: $85k

Points: 2.5

Cash to close: $120,455

PMI: $296.30

PITI + PMI: $5,537

Loan Amount: $715k

With option one, I am bringing ~$50k more to the table, but my monthly payment is $500 less and my loan amount is $75k less. I imagine this will help me with a refinance in the future. I imagine refinancing option 2 would be more difficult due to the higher LTV. However, I do like the idea of bringing less cash to the table.

Any thoughts between these two options? Is one a clear choice and I am having trouble seeing it?

Thank you.

Are you buying a SFR or multi unit? What's the rate on the FHA option? Based on the cash to close numbers, your break even point is 93 months or 7.8 years. That means it would take you 8 years to recoup the extra 50K down on the conventional by saving $533 per month on the lower monthly payment. Also note, FHA includes an upfront MIP of 1.75%of the loan amount that's finance into the loan.
I would look at doing 10% down conventional with & without a rate buy down to compare. If you go FHA, you're going to want to refinance at some point to get rid of the MI, that means you're going to pay more thanks to closing costs on the new loan. On a conventional, you can request the PMI be dropped in 1-2 years (if you have enough equity) for the cost of an appraisal.

Thanks for the response John. It's a SFR with a finished basement. Planning on renting the basement on Airbnb and living in the upstairs.

When you say "If you go FHA, you're going to want to refinance at some point to get rid of the MI, that means you're going to pay more thanks to closing costs on the new loan." do you mean that I am going to have to bring more to a refinance to get the LTV ratio down?

Unfortunately, I cannot do a 10% conventional due to DTI being above 50%.

0 Votes

Washington, DC

All Forum Posts by: David Cherkowsky

David Cherkowsky has started 12 posts and replied 60 times.

Post: Creative Financing for Airbnb in Northern Virginia

Post: Contractor Recommendation for Bathroom Addition in Northern Virginia

Post: Contractor Recommendation for Bathroom Addition in Northern Virginia

Post: Loan Option Advice for House Hack in Alexandria VA

Post: Loan Option Advice for House Hack in Alexandria VA

Post: Loan Option Advice for House Hack in Alexandria VA

Post: Loan Option Advice for House Hack in Alexandria VA

Post: Loan Option Advice for House Hack in Alexandria VA

Post: Loan Option Advice for House Hack in Alexandria VA

Post: Loan Option Advice for House Hack in Alexandria VA