All Forum Posts by: Jeff Dulla

@Juan Pablo Murillo echoing @Wayne Brooks sentiments. Looks fair for that size loan. Hard for lenders to price loans that size and get adequate return for their work as well.

@Luis Escobar I believe the standard language in Fannie docs is that you will occupy within 60 days after closing. So under the circumstance above you would be golden.

You would most likely want to start with whatever fits the combination of cheapest money and least out of pocket for you at closing. My guess is conforming (Fannie/Freddie). How much do you have to put down? How much are you looking for your all in monthly payments to be? Where are you looking specifically in Chicago? What kind of property?

All of these are very important things to pinpoint. Some of those answers are going to hone your process much further. For instance if you only have 3.5% to put down and want multi family, you may only be looking at FHA. But you need to talk with a solid lender well in advance.

Hopefully this helps. 

@Ryan Z. What you are talking about is just for home possible and for home ready. Those are only niche products within Fannie and Freddie guides. You can do a normal Fannie or Freddie loan with as little as 5% down (some 3%), without any of those requirements you are mentioning. 

Is there a reason you are being told you need to go through home possible or home ready?

@Ryan Z. - Not just first time home buyers but also low to moderate income buyers and also buyers buying in a targeted area. Here is more on Home Possible:

http://www.freddiemac.com/homepossible/

Here is a lookup to see if your property is in a census tract with no income limit for Home Possible:

http://www.freddiemac.com/homepossible/eligibility...

For Fannie - yes, it is possible your DTI is too high but that would mean the opposite of what you said for Fannie above (the lender said your income was too high).

FHA does have expanded debt to income ratios and is a little more lenient on certain things. That is definitely possible.

@Ryan Z. Unless there is information we are not receiving, it sounds like you are getting some misinformation. You shouldn't have an issue buying through either Freddie or Fannie with the scenario you are describing. Some notes to your bullet points:

- Freddie: This sounds like you are talking about Home Possible (a Freddie program for first time home buyers and targeted areas). Through a normal Freddie loan, there are no income restrictions for being too high. 

- Fannie: You shouldn't have an issue putting 10% down. In face, based on the scenario above, I would think Fannie/Freddie are your easiest options (not to mention least costly).

- FHA: I would think this would be the hardest option for you to use. You will have to prove that you have either moved or are moving up in home size compared to the property you already used FHA on. It sounds like that shouldn't be a huge issue but it is an obstacle you would face and there is a level of subjectivity to it.

Maybe there is something missing from your overview but what your lender is telling you does not make sense to me. 

Hopefully this helps. 

@Troy Pickens I don't want to oversimplify things but yes, sounds like BS. It sounds like they didn't properly price it out for you to begin with or they simply told you what you needed to hear to get the process started. In my experience, a lot of lenders do that. 

The bond market that 30 Year Fixed rates are based on has tanked and therefore they have "skyrocketed", but we probably lost 1.5% over six months, not over a week or two. Here is the bond market below over last six.

@Lucas Amuchastegui I cannot speak on the accounting/tax side of things but some items to keep in mind as you start your taxes with your CPA if you plan on buying more places with conforming or portfolio loans:

- If you take a distribution, it will show up ok your K-1 as such. This is the easier way to get credit for this income from an underwriting perspective but I’m sure it means more tax consequences.

- if you instead show net income from the K-1 in box one - you can be given credit for this income but only if your business returns pass a solvency test. Basically they are going to do a quick ratio (short term assets/short term liabilities) to make sure you have a 1:1 ratio or better. If this ratio is not as described, you will be given zero credit for your net income.

Hopefully this helps.

@Angela Meraklis-Lyons You shouldn't need the long standing history of the unit being rented and it probably won't come into play because you just took the property over. However, they should allow you to us 75% of the rent on the lease provided you can show them the lease and copy security deposit or rent payments. 

@James Orr

1. Everything you mentioned but Utilities. Also credit card minimum payments, student loans, car loans, leases, child support, alimony, etc. 

2. Depends on the situation. If you are talking about a seasoned investor with two years of tax returns there is a formula used based on their schedule E. If you are talking for a new investor, they will take a fully executed lease and proof of deposit from renter - take 75% of that for monthly income. If you are buying a brand new investment property they will typically have the appraiser do a rent schedule of comparable rentals - take the average rent they come up with and use 75% of that for qualifying. 

3. I would use 45%. 50% could go through but is going to be the exception and not the rule. 

Is the point of the formula to get close to the actual debt to income ratio the underwriter is going to use to qualify? If so, it is leaving out all debts outside of the singular real estate transaction. 

Hope this helps.