All Forum Posts by: Jay Hurst

This is an old thread but still looks to be a bit unanswered. I just stumbled on it and noticed I am mentioned in the above post. So, thought I would answer it hopefully thoroughly. 

There is NO law in Texas that precludes you from taking cash out of an investment property in Texas. The only laws regarding cash out are around homesteads. But, because homesteads are a bit hairy in Texas a lot of big lenders just simply do not do them just to make sure they do not run afoul of the Texas A(6) law. The rank and file loan officers are just confused and say cash out of investment properties are illegal in Texas because they know there are some sort of restrictions on cash out and Texas.  So, not Texas law issue period. 

You do NOT have to own a homestead outside of Texas. You can rent in say CA, but still take cash out of a non-owner property in Texas. But, many lenders who might generally allow for cash out on non-owners are afraid of this situation because they are concerned that it might really be your homestead since you have not bought a new house. So, they have an overlay.  For us, it has to pass the smell test. If you have moved to CA (or have always lived in CA and invested in TX) and your life, job etc are in CA then we are comfortable that you are not trying to disguise a  homestead as a non-owner to skirt the A(6) law. 

Hope that helps!

@Kevin Hassold   As it has been pointed out, your issue has nothing to do with Texas state law. Texas law only applies to homesteads. Fannie/Freddie both have the 6 months of seasoning before you can use the improved value. 

You can borrow up to 75% of a non-owner occupied single family with Fannie/Freddie before six months using the purchase price, not the improved value. This is called delayed financing.

What you and @Michael Caine are looking for is a Portfolio loan. That simply means the lender will keep the loan on their own portfolio and not sell the loan to Fannie/Freddie. That way the lender can set their own rules, so again since non-owner occupied properties do not fall under Texas law, a portfolio lender can use what ever seasoning requirement or even have no seasoning requirement they want. But, because the loan is to be kept on the lender's books the rates/terms are not as attractive as Fannie/Freddie.

I have investors as well as our own money that make these "non-seasoned" loans to well qualified borrowers. So, yes they do exist, just a bit harder to find and more expensive.

There are programs that look only at the cash flow on the property itself and ignore any other income/debts. You do have to reasonably good credit so not sure if you have a long enough history with only being in the country a short time. But, the cash flow loans absolutely exist and we do a lot of them.

It has been said, but Fannie will go up to 10 properties. Should be zero problem for most lenders.

I would agree with the above as there are lenders who do not know Fannie/Freddie requirements or have overlays that tighten their requirements above and beyond Fannie/Freddie. 

But, if you cannot qualify conventionally there are products that do not take into account your income but rather simply the cash flow of the property itself. Higher rates then conventional but lower then your hard money rates. 

You can absolutely get a NOO property vested in a LLC with a 30 year amortization that is also a 30 year fixed loan. The rate will be high, maybe two points higher then conventional, but it can be done.

Conventional loans  (those that will be sold to Fannie/Freddie) require 25% down for 2-4 unit non owner occupied properties. However, you can get portfolio financing, assuming you have good credit/meet all the requirements, for 85% of a 2-4 unit non owner occupied.  The rates/terms are NOT as good as conventional but the financing does exist. 

Suburbs in Texas generally all have similar zoning restrictions on accessory units. 

On a non owner occupied townhouse you can borrow a conventional 30 year fixed up to 75% loan to value.  (potentially higher loan to value for for non conventional, but higher rate as well) This would allow you to get out of the ARMs into a fixed rate and pull out cash. Easy enough assuming you have good credit, qualify etc. Great time to do it as well with the recent slight down tick in rates.

Assuming it is non owner occupied, 25% for 2-4 units is correct. Fannie Mae Loan to value matrix