All Forum Posts by: Jay Hurst

 @Dallin Blank  Buy a house with a pier and beam foundation. MUCH cheaper to fix foundation issues and much easier (cheaper) to fix plumbing issues. 

Quote from @Tony Thomas:

Any best practices around buying down points?

I'm considering a cash out refi. 70% LTV on a property that will likely appraise around $450K. I can buy down the interest rate. It would cost me $13,835 to get down to 6%, which would give the best value over the course of the loan.

Why wouldn’t I buy down all the way to a 6% interest rate? If not down to 6%, where would you buy down to?

 @Tony Thomas  Points, discount or buy down are all the same thing, and that thing is simply pre-paid interest. You are giving the end buyer of the loan (not the broker) the interest upfront instead of over time therefore you get a lower rate. And most folks want to "roll in" this cost into the loan. Assuming you do that here you are financing that pre-paid interest over the 30 year period. If you just take the 13,835 financed at 6% you are adding 83 dollars a month. so a double whammy.

Now, lets consider if rates drop to 5.5% in 24 months (not a prediction just a what if) and you could have refinanced at a much lower costs then the above scenario in what you paid in pre-paid and additional interest. on the other hand, if rates for your same scenario after your 5 year payback period is 9, then you will have an asset with a much lower then current market rent.  So, to answer your question there is certainly a case  for both sides and the correct answer is really unknowable. But, taking the lowest rate at any cost is not simply a no brainer do it every time. 

But, I will say, if the pricing above is for a conventional loan and you have good credit you should be able to better in pricing. 

 The reason it is harder to get a mortgage on a primary home vs investment property is a federal law called "ability to repay" or ATR.  A lender is required to establish the ATR of a borrower when it will be their primary residence. This came out of the fall out of the subprime era and eventually crash. A lot of those loans were made to people who never had a chance to actually pay back the loan and that resulted in a lot of people losing their homes. If you are buying an investment property, it is a business, and if you by something you cannot afford the thought is that is on you. 

The ATR does not have to be the same on every deal. There are many ways to look at it.  You mentioned you took time off, but are you back at a W-2 job yet? 

Very likely the condo project would not even be eligible for an FHA loan. Condo's value is very much tied to the overall health of the financial for the project. Most lower priced condo projects are not very healthy and why they are low priced. You can look up here: https://entp.hud.gov/idapp/html/condlook.cfm

FHA has the self sustaining requirement that requires the three non owner occupied units to cover the entire PITI which with 3.5% or 5% down is virtually impossible with today's interest rates and price level. So, really FHA is not even an option in the majority or markets today.

Conventional loans with 5% still require mortgage insurance. It is cheaper then FHA mortgage insurance, and you can potentially drop it in the future without refinancing unlike FHA.

 So was the house I am talking about. 

 It would "pop up" because you do not want to commit mortgage fraud. 

 @David Cherkowsky The above is absolutely correct, BUT do not assume you cannot qualify for a conventional loan. Make sure a competent LO with a NMLS number runs the numbers from you. My team has conversations all the time with borrowers, especially those that own real estate, that thing DSCR options are their ONLY options. But, guess what they are not loan officers or underwriters so they turn out to be wrong. (do not trust me to build the house, but I do know how to qualify you FOR the house.) Don't disqualify yourself without talking to an expert.

 I live in a historic neighborhood in Dallas in which there was a wedding venue operating. That is until the neighborhood got tired of the parking and parties from the venue, and got it shut down. (I did not hear the noise or  care but those much closer to the house did) so be careful with these kinds of plans  in the middle of a residential neighborhood.  

Also, it is bananas that a house like that is one is only 849k. Location, location, location!