All Forum Posts by: Jeff Shumway

Kerry this will depend on a lot of different factors so it's tough to give a yes or no without knowing more information. Interest rates are based off your credit score, how much you're putting down on the property, what kind of loan this is (conventional, asset based, DSCR, renovation, etc.). Also are you paying point for this loan? Without those key data points, it's impossible to tell you if you're getting a good deal or not.

David is correct. FHA is a government insured loan meaning each lender you speak to must make sure they conform to the limits and requirements set by FHA. These loans must conform to these requirements in order to be considered an FHA loan and be able to be sold on Wall Street. Else wise the bank is liable to hold the loan on their books as a portfolio loan. I've never seen any other program that will allow such a low down payment on so much money being lent out. It's a big risk to banks and the only reason they are able to do it is because the government backs the loan so they have to play by the government's rules.

Generally any limit to the amount you're approved for depends on 3 things. Debt to income ratio, down payment, and credit. FHA sets debt to income requirements which is the maximum mortgage payment plus other monthly liabilities in relation to your gross monthly income. You can use the anticipated rental income from the other units to go up to a maximum DTI ratio of 55%. This is higher than any other loan program. FHA requires 3-4 unit properties are required to be self sufficient meaning that the anticipated rental income from the other units must cover the mortgage payment. For multifamily properties I would say it's less common for the DTI to be a limiting factor since you can use the anticipated rental income.

FHA requires you to put a down payment of 3.5% percent of the purchase price and this is where a lot of investors get hung up. Down payment is often the biggest barrier to homeownership. The 3.5% is a hard and fast rule. Lenders can require a larger down payment and have additional requirements but no lender will allow you to put down less than 3.5%.

Generally lenders want to see a credit score of at least 620, especially if you are buying a multi.

I hope this is helpful. Feel free to reach out if there's anything else I can answer.

Trying to be an optimist so here goes- it's possible that an FHA loan works better for their budget than a Conventional loans. It happens- I have had clients with top tier credit and income who easily qualify for Conventional but ended up going FHA because it just fit their budget better (lower monthly payment and lower cash to close). Perhaps have your agent reach out to the lender to get a better idea of what is going on? It is definitely possible to close an FHA loan in 13 days so long as the buyers get everything in on time for underwriting and the loan company has it together.

The VA did away with loan limits back in 2019 so you shouldn't have an issue with the loan limit so long as this is your first use of the program. Plus if you have a property management company in place you should be able to use the anticipated rental income to qualify.
If the seller was going to finance a part of the loan, it would have to be in a 2nd lien position meaning in the event of a foreclosure they would get paid after the mortgage gets paid.

Would you consider keeping your current home as a STR when you get out and use your VA loan to buy your next property 0 down? I know it's not the Smokey Mountains but it's at least a start.

Lots of factors at play here... how many units are you looking to buy? What is your goal with the property (flip, long term rental, short term rental?) How much do you have budgeted to put down for down payment and closing costs? Where are you looking to buy? It'll also depend on your credit score.

If you want to run through a few different options, feel free to reach out. We have loan programs for all those options in almost 50 states and I would be glad to help. Best of luck to you!

FHA loans can be a great option and if it's a choice between using every penny you have to do a larger down payment and saving funds for repairs/emergencies/next property on a property that you're buying, I would pick 3.5% down FHA every time. Sounds like the lender is not really hearing your goals. The average age of mortgage loan officers is 55 so that might explain why he's a little old school. A lot of them just do not understanding leveraging.

There's benefits and drawbacks to every loan- the drawback for FHA is the PMI (which you can refinance into a conventional loan and eventually have removed) but the benefit is that you can keep more cash in your pocket and expand your portfolio quicker.

There's a couple questions that come to mind on deciding whether or not to do this refinance. What are your long and short term goals? If you're trying to build a portfolio and have more streams of passive income then I would absolutely advise refinancing. If you plan on holding onto that property for the next ten years and content with the size of your portfolio, then you may be better off to not do the refinance.

Don't forget that every property you buy is basically another piggy bank you can draw on for a rainy day. The more properties you have, the more rainy day funds you have. You can always do a cash out refinance to access those funds. So long as the property is rented, your tenants will be the ones covering the expense. And it will constantly be refilling too as the property goes up in value and your tenants continue to pay down the mortgage. 

I've heard their rates are high. Rates starting at 4.49% makes me think they base the example off 800+ FICO, 50% LTV rate and term refinance. It's like the car dealership that says you can buy a brand new Corvette for 20K at a .01% interest rate.

Rates for those types of loans programs should be a little more comparable to conventional. 

Henry, it sounds like a cash out refinance would be a good option for you. You could take out a loan up to 75% of the value of the investment property so .75 x 200,000 = 150K loan amount - 110K to pay off old loan - 7K for closing costs/prepaids/points = 33K cash back to you. If the investment property appraises at 220K, you might be able to get closer to 48K cash back. With rates so low right now you may be able to lower your rate as well.