All Forum Posts by: Ed Wood

You are correct it is $116,250 its also in the lender preliminary title report.

Although a zero balance they will use worse case senario and calculate the MAX equity line amount payment. So if you have a zero balance on a 150k equity line they will use the 150k payment amount counting against your DTI.

Keep in mind DTI isn't like FICO where a scale like good, better and best. DTI is yes or no. Before the QM rules kick in a conventional loans accept borrowers with a 50 DTI or less HOWEVER if a borrower is 45 or less less reserves are required generally speaking reserve requirements go form 6 months to 2 months with a DTI of 45% or less. SO as long as you're 44.9999% or 1% DTI you are still qualified.

Although a smaller bank and "portfolio" many still follow Fannie/Freddie guidelines this way if needed the can sell loans to raise cash. With that said here's the scoop.

1) 620 Mimumum FICO for investment properties any credit issues must be resolved. (collections paid, etc)

2) You're properties are not lease yet so the PITI is counting 100% against you just like a car or credit card payment. When you do rent these properties the underwriter will want evidence of the tenants deposit so keep a copy of the tenants deposit check and a paper trail into your bank account and a copy of the signed lease agreement. The formula for calculating net rents for properties that are not yet on your tax returns is 75% of the rent minus PITI.

It's a very common myth that FHA is only allowed to be used once or is only for first time home buyers. Anyone can go FHA if your financing a owner occupied property and you currently do not have a FHA loan.

If you have 15% down for a owner occupied property you may want to go with conventional financing at 5,10, or 15% down with regular mortgage insurance. It's MUCH less expensive than FHA.

2-4 unit properties are a great opportunity and even though you have a bunch of cash the great part is you can leverage cash so purchase more properties with conventional financing. Requirements will be 25% down and with units you can go higher than 417k SFR conventional loan amount here's the chart:

Duplex - $533,850

Triplex - $645,300

4 Unit - $801,950

Bonus is in LA and Orange county are considered high cost counties so you can even go higher in loan amount:

Duplex - $800,775

Triplex - $967,950

4 Unit - $1,202,925

Purchasing rental property takes more of a relationship with your agent and lender, an experienced investment property agent can provide you with tons of information you need and opportunities, and a good lender will make it happen for you.

One idea...

Take your 1-4 unit properties consolidate the debt load squeezing out any equity. If you have less than four 1-4 unit properties owned and financed you can consolidated your debt in to a few properties by doing a cash out conventional loan, soon as you hit 5 properties conventional guidelines won't allow cashout.

It will be interesting if you can complete the short sale without a agent. I agree with Holdman's comment.

In my experience banks maximize their sales prices this includes a properly marketed property and a bank ordered BPO or appraisal to verify the price of any offers presented. I think you'll find that banks will only accept offers close to market value and counter to those that are too low.

Just the basics Wells requires are:

1. Wells Fargo short sale application

2. Fully excuted listing agreement and Wells Fargo listing addendum

3. Fully executed purchase contract

4. Estimated HUD

5. Equator.com access (which you may have to be a agent)

Then the buyer signs a agreement with Wells Fargo they can not sell the property within 90 days. Here's the Wells documentation.

http://reo.wellsfargo.com/docs/104567_122011.pdf

... and other info

https://www.wellsfargo.com/homeassist/shortsale

Ed

In the Pre-market section the "Foreclosed" and "Pre-Foreclosures" are misleading to many buyers these properties are not available as they would think they are properties compiled from public NOD, properties banks have taken back. It's what foreclosureradar, and similar sites have as well. The "make me move" are people who are not in a hurry to move and looking for a way higher than market price for their home.

The best list are the portfolio list from back in the days of stated, no doc, option arm and sub prime loans. The big banks gobbled these loans up for 20 cents on the dollar from the smaller banks as they were closed the problem is the big banks from public and government pressure will not foreclose on these folks BUT they will expedite a short sale you just have to get the right list and talk the sellers into short selling their house where they're living for free. Probably not a easy task done ethically.

"The best time to plant a tree was 20 years ago. The next best time to plant a tree is now."

If you're going to occupy the property one idea is go with a 4 unit with FHA which will let you use the rents of the other 3 units to qualify and you only need to put 3.5% down.

You can go conventional even though you occupy one of the units mortgage guidelines require 25% down. Freddie Mac loosened their their guidelines and dropped the requred 2 year landlord history in order to use the rents to qualify.