All Forum Posts by: Gilbert Lugo

Thank you for your input. I am a New inverster. It’s been a bit difficult to land my first one so thought of doing this. The property is nearby so driving by and looking around sounds like a good idea. Both sides of the property(duplex) are rented. 

Originally posted by @Casity Kao:

@Gilbert Lugo

I would not recommend a newer investors to purchase a home sight unseen. First thing to do is try to offer with a very short inspection contingency window, as you still have an out if the home's condition is significantly different from pictures and or what you expcted.  If they accept then really it is not an issue that you cannot see it.  If they are selling AS-IS then that is a going to be much harder. I know a number of investors that purchase sight unseen including ourselves but we can take a loss because we have the volume to purchase many more so the numbers are in our favor.  For a newer investor if you are one, avoiding a loss on the very first deal is crucial.  Now if you can walk the grounds of the house, and see inside the windows with no tenants available then that is a different story.  Speaking candidly if there are no tenants and it says no trespassing you should be able to "snoop" around a little.  Now some people will say that is illegal but I can tell you no cop is going to write you a citation if you are merely closely observing without touching.  In general, we like to neighbor knock and ask the neighbors if they know anything about the house next door.  Based off how long the home has been vacant, the exterior condition of the home we will make assumptions.  If I see a bad roof, I am assuming water damage, and if the neighbors tell me it has been vacant for a full winter, then in my market I assume 3k or more from plumbing issues.  If the home is newer, and utilities are on I can assume a more cosmetic rehab, but in order to make these assumptions you have to have experience.  The only other way would be to assume the worst of everything but problem is in this market for an on market offer, I don't think your offer would get accepted.  

Stephanie thank you for the alternative suggestion. After doing some research and a few phone calls I will be coming into turns with a Freddie Mac lender in the morning. 

and yes do have one. 


Originally posted by @Stephanie P.:

@Gilbert Lugo

You have several alternatives to FHA in the first couple of replies to this thread.

Fannie 97 is good (limited to 1st time homebuyer).

Fannie or Freddie 95 are two other good ones if the borrower can come up with the extra 1.5% down and has decent credit.

Do you need a decent broker in Florida?  I can refer one if you want.

Stephanie

chris thanks for replying. I have a strong score. I’m in the situation which expressed at the bottom but I wasn’t aware of Freddie Mac I will look in to it thank you

Originally posted by @Chris Mason:

@Stephanie P. and @Russell Brazil are both on point.

Something I'll add:

FHA is often the "whoops" backup plan.

For example suppose you have a 642 FICO score and I send you out house hunting with conventional in mind.

Three months later you go under contract and "whoops" your FICO dropped a few points. So we pivot to FHA and it still closes, and closes on time.

Suppose another borrower has a 582 FICO and the same thing happens. Now the "whoops" is that it does not close at all, since FHA is the backup plan for FICOs as low as 580. To a seller, FHA looks like you're starting with what should be the backup plan.

For folks looking to do FHA multifamily with good credit that do not currently own real estate (mentioning this because I know man yon this forum are interested exclusively in multifam), Freddie Mac Home Possible @ 95% LTV is both better financing, and makes for an offer that is more likely to be accepted.

Re: "but it's 5% down instead of 3.5% down!" -- FHA has a 1.75% funding fee, typically tacked onto your mortgage balance. 3.5% + 1.75% = 5.25%. Except that this fee is gone forever, whereas 5% down conventional is 5% towards equity.

 
Btw Stephanie thank you for your insite 




Originally posted by @Stephanie P.:

@Gilbert Lugo

Get your lender to do the math for you.

Compare the rate of a 97% product with lender paid MI vs FHA with upfront MIP and monthly MI (not even talking about the ability to get rid of MI at 78% ltv vs. MI forever).

@Russell Brazil is absolutely right.

@Cara Lonsdale Here's an example of what I mean by "have to".  

Someone wants a renovation loan. They can use Fannie Mae's Homestyle Renovation loan or FHA 203K. If someone has enough money to put down 15%, they can buy units on an investment property with Fannie's Homestyle Renovation loan and not have to live in the property, but if they only have 3.5% down and will live in it, they have to go FHA to get the renovation money on units.

Here's another.  

If you've got a 580 middle score, you're not going to find a Fannie 97 (a comparable product) but you'll get FHA all day long. Again, the borrower has to go FHA because there is no option. That's when the seller has to worry about whether the FHA appraiser is going to care about whether their step is too high or if the railing going to the basement is tight enough etc...(and sellers don't want to have to worry about anything).

The products FHA insures are very specific and nichey, but useful in certain circumstances. The downside for the seller is there is no other place to go for that borrower if they don't qualify for FHA, but conversely, if they don't qualify for conventional, they may qualify for FHA.

Hope that clarifies

Stephanie