All Forum Posts by: Jeff Shumway

Hi Greg, congrats on getting your offer accepted! The loan you are looking for is a cash out refinance. There's a couple things to keep in mind though- if you do the cash out refinance before owning the property for 6 months, the maximum amount of cash you can take out if 80% of the purchase price NOT the ARV. The exact amount will depend on the appraisal since the max cash out you can take for an investment multi is around 70% LTV. For example, if the property cost 100K but appraised for 200K, the max loan amount you could take out is 80K.

Once the property has been in your name of 6 months, then you can take out the full 70% of the ARV and not be limited by the loan amount.

Some non-QM loan programs will allow you to take out 70-75% of the purchase price plus documented repairs within the first 6 months of owning the property. So for example if you bought the property for 100K and put 100K of documented repairs into it (assuming it appraises for 200K as well), you could get around 150K cash out of the property (75% of the 200K purchase price + documented repairs). 

Hope this is helpful to you!

Leveraging will likely allow you to build your portfolio much faster than if you buy the home cash. 

The MI and rates are still priced off the lower of the scores though

I didn't think his views were anything particularly earth shattering but it was important to have the Godfather of financial freedom on the show and I respect that. I would have been interested to hear the reasons why he thinks there will be a crash but he didn't go into a whole lot of detail on it. A broken clock is right twice a day I guess. 

I think he said a lot of things that needed to be said but as far as offensive? It mostly sounded pretty factual to me. 

I'm a little surprised that he invests in cryptocurrency. Personally I am a crypto skeptic. It's not FDIC insured and crypto is hacked all the time. Once it's hacked and stolen, you're SOL. All your savings and time spent acquiring those savings is gone if your crypto is hacked (although at his level it probably doesn't matter).

I also wish he had explained fractional reserve banking a little more. He is absolutely correct that money isn't real. This is the basic tenant of credit and fractional reserve banking. Elsewise we would be on the gold standard and have a very difficult time issuing credit because everything would have to be backed buy gold and there's a finite supply of gold. It would lead to a lot of problems. FRB may not be perfect but it is more adept at handling the monetary needs on a national and international level than gold backed currency ever will be. 

He made a few interesting points about investing in long term rentals for the millennial and Gen Z age groups who will likely never be able to afford a home due to student loan debt. Obviously down payment is the biggest barrier to homeownership. I wonder if we will see some of those barriers be removed over the next decade or so. There have already been some changes made (i.e. counting less student debt toward the DTI for FHA loans and averaging the middle scores for conventional loans with 2+ borrowers) so it would not surprise me in the slightest if we see additional barriers to homeownership be stripped away.

But he is absolutely correct that individual business owners who provide housing/real estate is a great service and one that the government should not make more difficult. Can you imagine a world where the government mandates and provides your housing? It's such a fundamental part of being an American and being in a free country. These eviction moratoriums (thank god they are ending) pitted landowners against renters and put us on a path to government controlled housing. I'm a little shocked they are ending to be honest. The moratoriums were a great way for the current administration to curry favor with their voter base. 

Other than it's kind of a crappy thing to do to both lenders? 

When lenders underwrite and approve you for a property, it's not just a matter of pushing the money button and approving you. There is weeks and weeks of making sure absolutely every t is crossed and every i is dotted. There's a reason it takes 30-45 days. Don't forget that you'll be required to pay for an appraisal and usually required to disclose if you've applied for additional financing on that property. Failure to disclose/lying on a mortgage application will quickly get you denied. 

Can you explain what you mean by targets? Do you mean danger of squatters or are you referring to something more along the lines of someone stealing title to the property? 

It is 25% down for a conventional loan. Although there are programs that require only 20% down so that might be worth looking into. 

I have clients who like to use them when they refinance so they are less impacted by the additional down payment. Although not all interest only programs require additional down payment. We have some that do not. In many cases natural appreciation will do the work to build equity for you as well. 

Paying points means you put additional money down at closing in exchange for a lower interest rate. Lowering the interest rate will lower your monthly payment. The rate you were quoted sounds a bit high. 

It shouldn't impact your qualification, especially if you have a great score. Lenders will ask if any new tradelines were opened but that's about it.