All Forum Posts by: Jeff Shumway

Hey Shawn, if you have 2 years of self employed tax returns showing enough income to qualify, then you should be able to purchase  a primary residence to house hack with a low down payment and possibly use a first time homebuyer program. In some cases 1 year of tax returns might be acceptable if it's in the same field. If this isn't available, then a first time homebuyer program will not be an option for you. Bank statement or 12 month CPA programs can be a good alternative. Usually these are at least 10% down. 

If you plan to close in an LLC, you definitely will not be able to utilize a first time homebuyer program or a low down payment (FHA, Conventional, VA, USDA) loan.

As long as the unit passes basic safety standards you should be ok- what is the issue with the cabinets? 

For the unit with extensive turnover, is it just new appliances being installed or are there additional renovations?

A good rule of thumb is closing costs run 2-3% of the loan amount. Most lenders will not let you do delayed financing for the full appraised value though, just as a heads up. There are some out there, but most lenders base the loan amount off the purchase price + documented receipts for repairs. 

You do not need a realtor to refinance your home. Realtors are only for purchasing a home. 

@Sean Starkey the mortgage payment for your primary will increase. Let's say it goes up by $100 (just an example for easy math). Let's say when you finance the investment property, the total mortgage payment (principal, interest taxes and insurance) is $1000. The true cost of loans you are repaying every month is $1100. It's $100 to cover the cost of the primary residence mortgage you refinanced as well as the $1000 actual mortgage tied to the investment property. You will want to make sure the rental makes enough money every month to cover the $1100 in mortgage payments plus any additional expenses (capex etc.)

Hey Rik, if you no longer live in the property 75% LTV is probably the best you will find especially on a multi. The VA loan is unique in that it does finance up to 100% LTV on the cash out refinance but you must be living in the property in order to make that work. If you are no longer living in the property and you have it rented out, it is considered an investment property. Investment properties come with more stringent LTV requirements than a primary residence because there is a greater risk for default on an investment property.

I'm not sure why your lender stated you need a commercial loan. Are you trying to close in a business entity?  You could possibly do it as just a conventional loan if you are closing in your personal name. 

If you intend to use the property for you personal use/vacation at least some of the year, it can be qualified as a second home. There is no specific mileage requirement but it has to pass the smell test. There is nothing prohibiting you from using the property as a short term rental when you are not using it, it just cannot be subject to any rental pools or management agreements that dictate when you can/cannot use your property. You also will not be able to use the anticipated rental income to qualify for the mortgage. 

You also do not have to own a primary residence to purchase a second home or investment property. 

It can be a really good way to get started. Like Joe mentioned, make sure the deal you purchase will make enough money every month to cover your new primary mortgage payment as well as the mortgage on the actual investment property. 

When you do a cash out refinance, you are basically paying off the existing mortgage on your home and replacing it with a bigger mortgage (up to 80% of the value of your home.) If your home is worth 900K x 80% = new mortgage of $720K so your payment will likely increase slightly. This will partially depend on the interest rate- if you are able to lower the new rate from your current rate, it will offset the increase in loan size. 

You will likely get around 60-70K cash back after paying off the old mortgage, closing costs, and any potential rate buydown. At closing you receive a lump sum payment. As a general rule of thumb, closing costs and title fees run 2-3% of the loan amount. Most closing costs are not actually charged by the lender. Lenders typically charge a small fee just to pay their staff but most of the closing costs actually come from the title company and some of the fees are state mandated as well. So a "no closing cost" refinance doesn't really exist. Any closing costs are just deducted from the proceeds of the refinance so the only thing out of pocket is the appraisal (usually $750-$900 depending). 

The process is similar to when you purchase the home. A lender will review your credit, income, and assets to make sure you qualify for the new mortgage. You will likely have to have an appraisal done on the property as well to certify the value. If all goes well, you should be able to have cash in hand in about 30 days. 

Hey Sean, this is something I see a lot of my clients do. Cash out refinance rates on a primary residence will always be cheaper than a HELOC or cash out refinance rates on an investment property. It's a quick way to get started as opposed to waiting and saving the entire down payment.

William, you will very likely run into an issue purchasing a primary residence multiunit property in your area whether you purchase it on a VA, FHA, or Conventional loan. It can sometimes be tricky to make it make sense to an underwriter why you are moving from a single family home to a multiunit. Underwriters do not think like investors. I'm not saying it cannot be done, it just has to make sense.

If you have access to a VA loan, is moving from your current home into a new primary an option? You could possibly retain your current home as a rental.

Cash out refinance is always a good bet- VA loans will allow you to access up to 100% LTV. You will take a serious rate hike above 90% LTV so I don't usually recommend leveraging that much. Not sure what you owe on your home currently, but if you refinance at 90% LTV your new loan amount is $328,500. Subtract out what you currently owe plus closing costs and you should have a nice chunk of change for a down payment on your investment property.

Do you plan on having the property more than 7 years? If not, then going with the ARM sounds like it could work for your needs. If you think you'll have the property more than 7 years, then the 30 year fixed is probably the better option.