All Forum Posts by: David Y M.

@Ronald Rohde The home has been empty for a while for whatever reason. It's been on the market for a long time.

Hi All, I had an idea recently to essentially pay 0 costs out of pocket for a home. Please tell me if I'm crazy for even thinking of using this method instead of just going with a 5% down 0 point 2.75% 30 year conventional loan. Maybe I just have too much time on my hands right now due to Coronavirus haha.

Assumptions that must remain constant for this to work: Interest rates remain similar in 6 months. Fannie May did a recent forecast that interest rates would remain low 3% even drop into the 2% range in the next 12 months. I know it's not really great to speculate but the money supply seems to be on a upside trend that's unlikely to stop. The obvious risk here is that I could have a lot of extra interest over the life of the loan, and higher monthly payments if rates increase.

Link: https://themortgagereports.com/65099/fannie-mae-predicts-2-9-percent-mortgage-rates-by-2021

I'm in Dallas, Texas right now, and our market is surprisingly getting pretty hot. Prices have seen a 6+% year over year increase in sales price, and days on market is also low. I was wondering if I should do this method to keep more reserves on hand and take advantage of the government program while I am still eligible.

Texas offers a Down Payment Assistance Program(DPA), and Mortgage Credit Certificate(MCC) for first time home buyers if you fall below a certain income (My first year working so still under that threshold). The DPA is a grant so free money. The catch is that there are extra third party fees in the underwriting process (roughly 1.5k) and the interest rates are set by TSAHC. 

Currently, a 4% FHA loan for DPA/MCC paired is at a 3.625% interest rate. The MCC essentially gives a 2k tax credit every year for interest paid. I know the exit for MCC isn't great but if house prices fall then it's a nonissue....

Link: https://www.tsahc.org/homebuyers-renters/calculator-results?credit=750&price=310000&loan_1=fha&assistance_1=4-grant&loan_2=fha&assistance_2=5-grant-gov

I was proposing to have seller pay closing costs, and raise offer price by an equal amount. For example, if list price is at 310k then I would increase offer by around 7-8k to 318k, and have seller pay closing costs.

AT CLOSE:  $0 costs out of pocket and instant 4% equity in the property. 

My next plan was to refinance the FHA loan to a regular conventional after 6 months of payments. Currently I have been quoted a 2.75% 0 point 30 year fixed rate conventional with a MCC paired (effectively like a sub 2.5% interest rate after tax return comes in).... It's kind of crazy. I've found that credit unions are able to offer some crazy low rates right now, but hopefully they didn't just bait me.

Another lender I talked to also has a program to cover most of the fees for a refinance including title and appraisal if I originate the first loan with them.

END RESULT AFTER REFINANCE COSTS: Net 4k-8k of free money, and pay $0 now, assuming I can lock a sub 3% rate in 6 months.

Looking at a property that was foreclosed in 2012, and then purchased by what I assume is a Hedge Fund/Investment Group and then rented out. 

The home has been on the market for a while, and they are only offering a Special Warranty Deed. Since it's been like 8 years since foreclosure, would it make it less risky that a lien would arise that was from an owner beforehand? 

Is there anyway that I can limit my exposure, or is that something I would just have to figure out myself with title insurance and such?

Last Question - are these investment groups flexible on price? I know they have pretty deep pockets, so just curious if anybody has had success negotiating with them.

I apologize if this is a noobie question.

I am currently looking at a property in Collin county for a primary residence with a mysteriously low tax assessed value - half of all the other houses on the block. I looked deeper into it and it seems to be a joint ownership split 50/50. Is it even possible to split a property tax base like that? I tried looking online and it doesn't seem possible, but it's the only reason I can see that would make sense.

My next question is - if it is in fact not split 50/50 is there anyway that I can dispute my newly assessed property tax in 2021? As far as I know if I apply for homestead exemption it won't be effective until the year after. 

Thanks in advance!

@Andrew Postell Thanks Andrew for your insight! I will call up my lender tomorrow for clarification and see what rates I can get officially quoted for. I definitely want to do conventional if I can due to the lower closing costs and PMI.

I will most likely rent out one room to cut down on expenses. From what I have been told this is allowed.

I'm not sure if anything I'm currently looking at for as a primary residence will cash flow at this moment.... but at least I won't be renting.

I was playing around with Zillow data in PowerBI and made a dashboard to get an idea. Don't think it's the best data, but it's a starting point. Don't have access to publish the dashboard but if anybody wants to cross verify the input data let me know :)

I saw a couple other posts about these programs on bigger pockets, but I still had some questions.

In the Dallas area the income limits are 64.2k for the Mortage Credit Certificate and Down Payment Assistance combo which I currently qualify for. The MCC effectively lets you save the 2,000 every year as a tax credit, which partially offsets the higher interest rate of the DPA program. 

As of late 2019, they changed it so that you can only pair the DPA with a governmental style loan unfortunately, so PMI might also suck. My initial thoughts are that this would be a great program to use if I wanted to househack a SFH that I also wanted to live in for over 3 years.

My questions are:

1. Does anybody else have experience with using this program as a beginner investor tool?

2. Were there any implications if you wanted to refinance? Was this considered a sale that would trigger potential tax recaptures? It seems like this would work best after the 3 year period if so.

3. From my conversations with a lender, it seems like I am in the clear after the 3 year period for payback of the DPA grant, and MCC is not tested again after closing, so as long as I live in the property I can keep using the 2,000 tax credit.

@Bruce Lynn Thank you for providing amazing insight! I also saw the same article about the 600 companies moving to Dallas. PGA, Goldman, and Amazon were on my radar and hoping to make the best of 2020 despite this virus. My only concern right now is that my current apartment lease ends in July, and I'm not sure if I should sign a short term lease or buy this summer to capitalize on fewer buyers in the market - then there's also the whole can of worms with artificially inflated mortgage rates right now bleh.

This is extremely subjective because nobody really knows which way the market is going. We don't have really any great data yet, and forbearance of up to 12 months seems like it would greatly insulate most real estate prices from taking a nose dive in the near future. 

I was just looking at charts from the 2008 and the Dallas market seemed to be pretty insulated from the Great Recession. The median house prices went mostly sideways and a little down, but nothing like other parts of the country. Oil is also taking a massive hit, but the DFW isn't as dependent on that industry as much as Houston. Affordability/Cost of living is also pretty attractive, but would like to hear any thoughts on this. Also, if anybody can provide any bills that were enacted in Texas over the last couple years that also helps this argument, that would be appreciated. Thanks!

@Andy Webb So basically what you are suggesting is to ditch the idea, and get a home with her first, and then get a rental down the road? Maybe I am impatient because that definitely sounds like a 3-5 year minimum plan for me considering my finances. I will definitely take this into consideration or just eliminate the house hack plan idea together. 

For the estimated cost, I based the 40k-60k off a zillow post, and what the wholesaler estimated the cost of renovations to be. I have to admit, I'm a newbie and very appreciative for this info! It likely means I won't have to budget anything crazy expensive in the future.

Link: https://www.zillow.com/homedetails/3517-Morningstar-Ln-Farmers-Branch-TX-75234/26998896_zpid/

I had just assumed that it was somewhere in this range for the cost of modern appliances, and materials. I saw another sale in this area, but it seems like they probably tore a couple walls down or even opened up the ceiling. The link is below.

Link: https://www.zillow.com/homedetails/3905-Clubway-Ln-Farmers-Branch-TX-75244/26995381_zpid/