All Forum Posts by: David Lutz

@Nguyen Quach

Payments on a P+I HELOC are going to be more consistent than on an interest only HELOC that balloons up after the draw period. Lenders are qualifying you based on the assumption you're going to max the line. The more advantageous D/I ratio is going to depend on whether the interest only lender is going to use the draw or repayment period payment to qualify you.

So it has less to do with how Third Fed does things and more to do with how the other lender will. I'm not going to speculate on that since I'm not an underwriter. The Max line, however, is going to be capped by your L/V ratio as well. So the difference between the lenders is going to disappear as the customers ability to replay the loan (higher D/I ratio) ceases to be the limiting factor.

If the D/I ratio is driving any material difference in the size of the line then it's a major concern for the lender as compared to the L/V. I'd do some major soul searching before taking less favorable terms on a larger loan amount when one of the lenders is concerned about ability to make the payments - particularly when you're only getting the larger line from an interest only lender if they're looking at your ability to make draw period payments and not repayment period payments which will be roughly twice a large.

Sorry I don't have a simpler answer, but I hope my rambling is helpful. Best, David

@Nguyen Quach

When I got my HELOC the "appraisal" consisted of the lender having someone drive by the house and take pictures from the street to check external home condition and put together some comparables in the area. Very quick and easy and they never bothered me.

Do you guys pay for home inspections prior to auctions or just go based on your knowedge?

Thanks,

David

Hey  @Ayne C.,

Hope you're doing well. I'm starting to research the same thing. At this point I have an agent checking out the property I'm interested in. I'll either drive up then or as a follow up depending on the timing. Here's a my current list of planned actions. Let me know if you discovered anything else worth doing :)

• Check if the bank has made any repairs to the home
• Check if the bank has conducted an inspection we could see
• Check the Bank's purchase price
• If the property has any liens on it (http://www.searchq.com/ or https://nextace.com)
• Should we try and make the Bank an offer prior to the auction
• We'll need to call the title company and verify who owns it (confirm the situation)
• We'll need to verify we can buy title insurance at closing
• Check in with a real estate attorney
• Decide if I want to pay for a home inspection or appraisal prior to auction (really not sure on this one - auction is as is no contingency)
• Estimate the potential rental income for property and run numbers on max purchase price that will support my desired CF given any needed renovations

Best - David

New to BP, Really appreciate the comments here @Chris Martin, @Jill Patton, @Edward R., @Steve Racicot

I'm looking at bidding on an H&M REO in two weeks and it's my first investment property (Market value ~$140K if in good condition, so not an expensive one) . In terms of what to do, I'm planning to spend the $50 for a title search and I have a local agent touring the house (I'll drive up if I can or as a follow up) and would plan to buy title insurance. I'm also checking to see if the bank did an inspection they can share.

Here's where I'm caught up. It's an as is - no contingency auction. Given your comments here would you pay for a property inspection and/or appraisal prior to the auction? (Even if the house looks like it's in good condition I'm guessing the answer is still yes and write it off as the cost of doing business, or if you assume some repairs and factor that into your max bid).

And in your experience, at what discount against market are you generally buying REO at auction? (BTW, if it already didn't sell at a foreclosure auction, why do they put them back up for auction as REO instead of selling through a broker?)

Thanks much for your thoughts. - David

In SoCal, but just wanted to add my thanks to the folks posting here. It's easy to loose the forest for the trees when you're buying your first properties and lose track of the big picture. 

Any thoughts on at what distance/travel time control becomes an issue? I'm in the San Fernando Valley and looking as far as Fresno and the Coachella Valley for affordable +3 bedroom properties - but worried about how that will play out even with a property manager (those areas are a 2.5-3 hour drive).

Would like to find something closer (where I know the area better) but I'm trying to spend <$300K for my first RE investment. (+3brd with intent to hold and rent to families for stability, but may rethink and look for a closer 1 or 2 brd)

Anyway, thanks again. Really appreciated the different flavor of this thread.

@george blower

@George Blower

Those would be the ugly reasons,  yes. Which is why I'm not planning to borrow against my 401k, but it's still a safety option against a +10% heloc rate 

most heloc tie to prime interest rate as reported by one of the index, you can look up they're historical rates and they don't seem to move that fast. If you're worried about rates hitting 10% just make sure you have an exit strategy.  Mine is to borrow against my 401k to pay off the heloc in a worst case scenario. Would be ugly for a bunch of reasons,  but better than an out of control variable rate. 

Btw, I'm taking one out with third federal.  -1% to wsj prime index. No origination fees and only cost is $65 a year. That's 4.5% at the moment.  And it's not a teaser rate.

If you need any details

I'm using third federal. Rate is -1.01% to prime as reported in the WSJ. no fees... at all.  except for $65 per year 2-10 of the draw period. Payments are principle and interest. Far and away the best offer I found.