All Forum Posts by: Jeff Shumway

Rayven, gifts are not allowed for a conventional investment property loan. Do you and your fiance have a joint bank account? If you have full access to the funds in there, you can do that for the down payment. 

The VA home loan is such a powerful tool. I own my house on a VA loan and there's so many benefits that come with it even aside from purchasing with 0 down. If rates improve, you can do an interest rate reduction refinance loan (VA IRRRRL - you'll start getting a million mailers a day for this when you close on your VA home loan). Usually no appraisal is required and closing costs can be wrapped into the loan amount so you lower your monthly payment for nothing out of pocket. The VA loan also allows a much higher loan to value ratio on a cash out refinance vs. any other loan type. You can take a loan out up to 100% of the value of the property although most vets only do 90% since the rates aren't as good over 90%.

And of course, not having monthly mortgage insurance plus the rates on VA loans are usually lower than any other loan type on the market.

The VA loan is also really awesome when it comes to purchasing a home and the appraisal - If the appraisal comes in low you have two opportunities to contest the value. Other loan products only give you one opportunity to submit comps/contest the value. Also VA appraisers are required to have the appraisal done in 10 days whereas appraisals for other loan types can drag on forever and ever.

VA loans are also super flexible in the debt to income ratio. For example on a conventional loan, the maximum debt to income ratio is 50% and 55% for FHA. For VA, as long as you meet the residual income guideline you can go well over the debt to income ratio. The residual guidelines just means you have enough income left over every month after paying the mortgage and all credit cards/auto loans/student loans etc. The required amount left over depends on your region and family size.

STR income has to be shown on your taxes for 2 years in order to use it to qualify for a bigger mortgage on your next home. If you put a long term renter in there, you may be able to use that income to offset the mortgage for your current home. Additionally, if you buy a multi, you could use the anticipated income from the units you will not be occupying to help you qualify for more home.

You could possibly get around a couple thousand out of the property. Is it your primary residence or an investment property? The loan to value ratios are different for each occupancy type. The maximum loan to value for an investment property is around 75% and the maximum loan to value for a primary residence is 80%. Meaning the maximum loan amount you could take out for an investment property is .75 x 130,000 = 97,500 or if it's your primary residence, .8 x 130000 = 104,000. Subtract what you currently owe from the loan amount so for an investment property 97,500 - 85000 = 12,500 and for a primary residence 104,000- 85000 = 19000 and then subtract closing costs/prepaid expenses from that. 

That is absolutely incorrect. Be wary of the online lenders.

Nothing legally stops you from doing that but... why? Financing a property isn't just a matter of clicking the button to dispense money. The entire team at a bank works for weeks on end to make sure you meet your closing date. There's a lot that goes into it- not to mention most loan officers work on commission so whichever bank doesn't get the deal will likely have been depending on the paycheck they thought they were going to get. 

I would recommend sticking with one bank that you're confident will get the deal done. Also if you have two banks work the deal, you'll likely have to pay for two appraisals. Plus banks run so many credit checks, they will know that you at least had a credit inquiry with another bank. 

Exactly- the occupancy of the property and number of units determines how much down payment is required. Primary residence loans require less down payment because they are considered less risky. In hard times, borrowers are much more likely to default on an investment property loan than a primary residence. Because of this, interest rates on an investment property loan are higher than a primary residence or second home. It's all dependent on the level of risk associated. 

The 25% down is only required for a 2-4 unit for non owner occupied Conventional loans. You can buy a single family non owner occupied home for 15% down. This is not an additional 5% thrown on by lenders, this is the bare minimum required by Fannie Mae. 

You can purchase a second home for 10% down so long as you intend to occupy the property at least part of the year as a vacation home. You cannot use the anticipated rental income to help qualify for a second home (or else that would make it an investment property) and you can put a long term renter in there a year after owning the property. While you are not using the property, you can AirBnB it out. There is no distance requirement or certain number of days you must utilize the property for your personal use but it has to pass the smell test in underwriting. 

A conventional loan is sold on a secondary market and because it is backed by Fannie Mae/Freddie Mac (government sponsored entities) the loans must meet certain requirements and check every box to be considered a conventional loan. Some lenders add additional requirements (such as higher down payment requirements, stricter debt to income ratios, etc.) to reduce their risk. Since conventional loans are available in all 50 states, the basic requirements don't vary too much state by state. 

Hope this is helpful!

Lots of lenders offer programs that use the anticipated rental income from the property instead of your personal income and do not have limits on the number of financed properties. It's referred to as a debt service coverage ratio loan. They're pretty simple. Usually it's 15-20% down and require a credit score above 720. Generally I've seen rates for the online DSCR lenders be higher than what a broker would offer. Terms for DSCR loans usually aren't too different from conventional loans.

Hi Alex, congrats on purchasing your first investment property! I'm not sure if you've had much time to peruse the forums but many investors use the BRRRR method, meaning once they acquire that first property they renovate/improve it to force appreciation and then do a cash out refinance to get their money back out. BRRRR stands for Buy, Rehab, Rent, Refinance, Repeat.

For example if you purchase a property for 100K with a 25K down payment and a note of 75K, you would renovate the property. Let's say the property is worth 150K after repairs. You could do a cash out refinance for a loan amount of $112,500 (.75% x 150K), pay off the original note of 75K and get around 30K cash back in your pocket after closing costs are paid. 

In this market, hopefully you won't have to do too much renovation and can just let the market appreciation do the work for you. 

A couple things to keep in mind- most lenders will require a 6 month seasoning period to use the full appraised value of the property. You may be able to refinance sooner than the 6 months but most lenders will base the loan amount off the original ex. 100K purchase price rather than the 150K after repair value. Most lenders allow a loan amount of up to 75% of the appraised value for an investment property. Keep this in mind when you're running your calculations. The minimum down payment requirement for a single family investment home is around 15-20%.