All Forum Posts by: Greg Dorn

Other thing I would consider is a HELOC. Primarily if you have a rental but dont have somewhere you have to deploy the capital right away you can get a Home equity line of credit and be ready to jump on a deal that may come up.

@Forrest Faulconer I work as a mortgage broker and am curious do you know what the point cost was and the name of the lender?

Hey @Daniel Villanueva, So if you are in a good area now you should just buy a place to owner occupy for as long as you live there. If work takes you some place else then make it a rental and get a property manager. If your work just has you traveling all the time then buy a duplex or home with an accessory dwelling unit and store your stuff there and do your travels for work. (just my personal opinion)

Most of the time with a purchase owner occupy loan you do list you will live there for a period of time (usually a year) but if work takes you somewhere else the lenders are understanding of the situation and you can then do another owner occupied loan for the next place you go. Just make sure you only buy something that would work as a rental as well.

So I wanted a job as a lender to be able to learn more abut financing and I agree with @Elise Marquette. The short answer is yes and the long answer is you should shoot for making up the cost of the loan and points within about 3 years so if you keep it for 7 then you will have 4 years of additional cash flow. Just dont buy down the rate too much as it will drive the recoupment time up. 

So self sufficiency is not required for duplexes (it is particular to FHA for 3 and 4 unit properties). Also for the 15 percent I was referencing what I was personally qualifying for to refinance out of my VA and into a conventional loan but standards do change regularly.

I personally decided to just do an interest rate reduction loan (available for VA and FHA) for the current home to lower the interest rate. Down side of the VA and FHA loans is they have a built in mortgage insurance (Funding fee and MIP) but for us the funding fee on a VA interest rate reduction loan is really low. Then for the next one we will just do a larger down payment (20 percent if a multifamily or 5 percent if it is a single family).

So I am in a very similar position (and I have my loan originators license so doing lots of research for myself). We have been in our duplex since April of 2019 and bought it on a VA loan.

The 2 options I have is to refinance out of the VA loan and into a conventional loan so we can use the VA again OR to leave the VA loan in place and start saving for a down payment. Either way for a multifamily property a conventional loan wants 15% equity/down payment.

You do not need to refi your current loan if you are leaving unless you want to do another FHA loan. But if you are going to refinance out of it make sure you do it before you leave.

And a note on the income qualification, You cannot use any projected income from the unit you currently occupy (only 75% of the rents from the other unit can be used to qualify). 

So if you are in the same industry as your last job but just changing how you get paid (you were salary and now paid per mile) then you have to show a year on the new style of income. If you leave the industry or you start a business then you will have to average the income for 2 years. 

If you can start something part time that would be best because you can still use your W2 to qualify and build up your revenue. Just be careful about financing the start up costs. You are going to need to be able to pay for all debts (including both mortgages) ideally with 45% of your income and you can only count 75% of the rents from the half of the duplex that is currently rented out (you cannot count projected income from the unit you currently occupy). 

Hope that helps. 

Two things going on with the current lender doing the refinance:

1. The lender that is doing your refinance right now is watching your credit to make sure nothing new pops up. If something does show up you will have to do a 'letter of explanation' as to what the inquiry was for and if there is any new debt associated with the inquiry. If there is a new debt the lender will have to factor it into the debt to income. 

2. If you take out a HELOC on a property you are currently refinancing and you put one dollar on the balance of the HELCO the 'combined loan to value' CLTV will be different than the LTV and you usually get hit with a .375% cost increase on the loan.

Best to not to a HELOC while doing the refinance and if possibly wait to do it on any other properties (or be prepared to provide a statement and make sure you still qualify with your debt to income.

In general a business expense that is paid for by a business but shows up on your personal credit report can be excluded once documentation is provided. If you do not provide documentation for the lender to exclude any debt then you loan can be rejected most likely because you did not qualify based on your debt to income. 

So biggest issue I see is with you #3. You can only have one qualified second home loan. If you try to go get another second home loan you will have to do something else with the first condo you got in June which could mean selling or refinancing into a rental property loan. With that you also cannot use any of the short term rental income to qualify. 

Hope that helps

There are ups and downs to each option. Couple of points up front: if you have a second line or loan it will add .375% in costs to the loan except if your heloc is at a 0 balance and the combined loan to value (CLTV) is the same as the loan to value (LTV). Like you said in scenario 2 it will mean adding 20 to 60 days to subordinate the HELOC for the new loan and this does not start until after the appraisal report is in because it has to go with the subordination request. Last issue is that if you do a cash out in stead of a rate and term (your option c). It will add about .5% in loan costs.

Honestly it is very difficult to give a recommendation to what you should do without knowing what your long term goals are. I would be happy to talk about it and more if you ever want to shoot me a DM