All Forum Posts by: Jeff Dulla

Hi Chris,

Do you mean is it possible to secure a loan for a land contract?  If so, yes, it is.  Land contracts have their set of guidelines in the lending world, and timing is important when it comes to determining the type of transaction.  Meaning, if the land contract was executed within the last 12 months the transaction can be a purchase.  If the land contract was executed over 12+ months ago, Fannie Mae would deem the transaction a limited cash-out refinance.  

I hope that answers your question - please let me know if I can be of further assistance!

Jeff Dulla

Hi Erik,

Is there a certain draw to FHA financing? Conventional guidelines and down payment requirements have loosened up a bit. If you're attracted to the low down payment structure of FHA, your son could obtain a conventional loan, with as little as 3% down that would cost him less over the life of the loan (mortgage insurance premiums are generally less with conventional, and ultimately cancel once enough equity is obtained).

Either way, if your son was in school prior to working this job, and the job is full-time salaried, a lender without overlays should be able to use his current income to qualify him.  The history should not come into play.  

I've attached a snippet from AllRegs, which publishes guidelines for Fannie, Freddie, FHA, etc. If the lender you're working with does not have any overlays, they should follow the attached guidelines for determining income.

Hope this helps!

Jeff Dulla

@Danny N. - I cannot share contact info with you on here so just PM me and I can get you details. 

@Danny N. There could be quite a few options but hard to say without looking at the specifics. I would say it doesn't sound promising to go with a conforming loan (which it sounds like you are thinking of for the second home) but I know Chase well and I have zero confidence anyone there reviewed your returns in enough depth to qualify that statement. So you may be able to go conforming.

If not, there are lenders rolling out programs that would probably work best for you. One in particular is called a bank statement loan. It would take your business and qualify you based on cash flow into the company's business account (essentially showing income that you are not necessarily claiming on your return because they are paired off by expenses). Like many of these non-prime/portfolio loans, they will carry higher rates/costs. 

@Karsen Wynn I think subprime is obviously a dirty word and these are actually called Non-Prime. I think they are quite a bit different than anything you have seen in the past. Most companies doing these are very heavily regulated and have to take the right approach to do these loans. I have heard many are getting rated by Fitch, Moody's, etc again. 

There is a serious trade off for using these but they are great loan programs if you are trying to do something outside of the bucket of conventional financing. Any other products you would talk about on this site - private money, hard money, etc, are going to carry the same higher costs. You are asking for an exception to be made to the rules of the majority of conventional lenders out there. 

@Karsen Wynn Even if you find a part-time job, they are going to want a two year history of you having part time employment in order to give you credit for that income.

Your best bet is going to be to go through a Non-Prime/Portfolio style loan where they are approving you like they would a commercial property - based on cash flow and some other metrics that do not require you to have income. Rates will be a solid amount higher on this program and you will also have to pay points to acquire it. 

@Jackie Ledesma - Very cool. Do you have an area you would like to focus on? 

Aaron Hays Not necessarily doable at the numbers you are talking about. You can definitely get actual cash back to you from a refinance but you are limited as to what percentage of the value you are allowed to take the loan out for (called loan to value or LTV). If this is a primary residence for you, you can technically go up to 85% on a cash out refinance. If investment, single unit, you can go to 75%. So whatever you think the value is (130k or more), multiply it by one of those percentages above. That is the max loan amount you could get through conventional means. You also need to take your interest rate into account when considering this process.

@Bill E. An FHA loan will not be treated much differently than a conventional loan when you go to get another one. It will be about the rent calculation the underwriter will give you credit for. It's similar across FHA, Fannie and Freddie. Really, the way it could impact you is if the higher payment lowers your cash flow for underwriting enough. That and if you cannot come up with enough capital for a down payment on another one.

@Michael Pakizer - it's definitely true. Non-Prime, Portfoilio style loans. The trade off is a rate that is a solid amount higher than current market. Also this lenders work with PAR pricing so you will pay points more often than not. Typically in the range of 1.5% to 2.00%. So between the rate and points, it's not too good to be true and the lender is making a substantial profit that justifies the risk.

Aside from that, the rest of the process is pretty similar to that of any refinance transaction.