All Forum Posts by: John Burke

Quote from @Ankit Rathore:

Hi, I got around 19k seller's credit for a house of 775k. I have 2 offers from lenders:

1. from private lender which allows me to buydown interest rate (I can do 1-1 buydown) and rest money will be used towards closing cost (19k - 13k). where closing cost is 13k.

2. from chase bank which allows me to use seller's credit towards closing cost and rest can go towards principal reduction. Closing cost is same 13k.

Hopefully, I will be refinancing the loan after 1 year(hoping interest rate will come down in 1 year). Both offers are very similar with respect to interest rate and closing cost. In my opinion principal reduction is the best option instead of buying interest rate since money will not go directly towards principal. What do you all suggest?

I would use the seller concessions to do a permanent rate buy down instead of a temporary one. Here's why. 
1) If you take 6K off the loan amount, it drops your payment $41.44 per month but, if you take the same 6K and buy down your rate by .375%, your payment drops $226.73 per month. 

2) While experts are predicting the Feds will cut the Fed Fund Rate, that doesn’t have a direct correlation to mortgage rates. Mortgage rates are driven by The 10 Year Treasury so in order for mortgage rates to go down, we need to see “investors” pull money out of the stock market and put in to the 10 Year. That happens if the markets start to get really weak/volatile. Which is what happened a couple of weeks ago. If The Feds manage to avoid a recession, mortgage rates may not see much of a drop. On the other hand, a recession could cause mortgage rates to go down more but it will likely not drop to COVID levels or even the levels we saw during the foreclosure crisis, unless the Feds start up with Quantitative Easing again.

Quote from @David N.:

I'm in discussions to buy a second home/investment property in Vermont. My lender just called me quite flustered to say that he has learned that no one is doing the traditional 10% down loan for second homes, which is what I was going to use. Is this true? Does anyone have different information?

Thanks, David

Fannie Mae & Freddie Mac updated their Loan Level Price Adjusters (LLPAs) back in 2022 for 2nd homes. The new LLPs add 4.125% in "hits" to the rate from 80% LTV and up. From 75%-80% the hit drops to 3.375% & from 70.1-to 75% it drops to 2.125%. Right now, there's not enough "room" in rates to cover those hits so borrowers would pay discount points to cover them. For example: Looking at pricing right now where @90% with a 720 score, you'd be looking at paying 3 points to get a 2nd home mortgage. So basically what Fannie & Freddie did was price themselves out of the 2nd home market.

Quote from @Dylan Lineberger:

I constantly hear people online (Social media) talking about getting an FHA loan and house hacking a 1-4 Unit property. They say to move out after one year, find a tenant for the unit you were in, and buy another property to rinse and repeat. My question is how they are getting the second property using an FHA loan?? Can't you only have 1 FHA loan at a time. I've read that there are exceptions like moving 100 miles away or jobs etc. Do they just build up enough equity to refinance into a conventional loan in 1 yr?

FHA has caught on to this trend & updated the guidelines to prevent people from abusing FHA financing.
Here are the guidelines directly from the FHA Handbook:

Policy Exceptions Eligibility Requirements

Relocation:

A Borrower may be eligible to obtain another FHA insured Mortgage without being required to sell an existing Property covered by an FHA-insured Mortgage if the Borrower is:

• relocating or has relocated for an employment related reason; and

• establishing or has established a new Principal Residence in an area more than 100 miles from the Borrower’s current Principal Residence.

If the Borrower moves back to the original area, the Borrower is not required to live in the original house and may obtain a new FHA-insured Mortgage on a new Principal Residence, provided the relocation meets the two requirements above.

Increase in family size:

A Borrower may be eligible for another house with an FHA-insured Mortgage if the Borrower provides satisfactory evidence that:

• the Borrower has had an increase in legal dependents and the Property now fails to meet family needs; and

• the Loan-to-Value (LTV) ratio on the current Principal Residence is equal to or less than 75% or is paid down to that amount, based on the outstanding Mortgage balance and a current residential appraisal.

Vacating a jointly-owned Property:

A Borrower may be eligible for another FHA-insured Mortgage if the Borrower is vacating (with no intent to return) the Principal Residence which will remain occupied by an existing co-Borrower.

Non-occupying co-Borrower:

A non-occupying co-Borrower on an existing FHA insured Mortgage may qualify for another FHA-insured Mortgage on a new Property to be their own Principal Residence. A Borrower with an existing FHA-insured Mortgage on their own Principal Residence may qualify as a non-occupying co-Borrower on other FHA-insured Mortgages.

Rental Income from other real estate holdings may be considered Effective Income if the documentation requirements listed below are met.

If Rental Income is being derived from the Property being vacated by the Borrower, the Borrower must be relocating to an area more than 100 miles from the Borrower’s current Principal Residence.

The Mortgagee must obtain a lease agreement of at least one year’s duration after the Mortgage is closed and evidence of the payment of the security deposit or first month’s rent.

(b) Required Documentation

(i) Limited or No History of Rental Income Where the Borrower does not have a history of Rental Income for the Property since the previous tax filing, including Property being vacated by the Borrower, the Mortgagee must obtain an appraisal evidencing market rent and that the Borrower has at least 25% equity in the Property. The appraisal is not required to be completed by an FHA Roster Appraiser

You can use FHA to buy your first property and then go conventional on the rest. 

Quote from @Davin Manfredi:

Hello everyone,

I currently own a house hack with an FHA mortgage and I am the sole owner of that property. I am going to be getting married in a year, and I was wondering can my spouse get an FHA loan after we are married even though I have one, but am the sole owner?

Hi Davin, It mainly depends on whether or not you plan on being on the new FHA loan with your spouse. If not & your spouse will be the only party on the loan, no problem. If you need to be on the loan as well & you plan on keeping your current home, you run into the FHA guidelines regarding having more than one FHA -insured mortgage at a time. There are only a few exceptions that allows someone to have more than 1 FHA loan at a time.

Relocation: If a borrower is relocating to a different area not within reasonable commuting distance of their current residence, they may be eligible for another FHA loan to purchase a new primary residence. This is common when a borrower moves for work reasons​.

Increase in Family Size: If the borrower's current residence becomes inadequate due to an increase in family size, they may qualify for a second FHA loan. In such cases, the borrower must provide evidence of the increased family size, such as birth certificates or adoption papers, and demonstrate that the current home does not meet their needs​.

Vacating a Jointly-Owned Property: If a borrower is vacating a residence that will remain occupied by a co-borrower, such as in cases of divorce, they may be eligible for another FHA loan. Documentation must be provided to prove the change in occupancy status​.

Non-Occupant Co-Borrowers: A borrower who is a non-occupant co-borrower on another FHA loan may still be eligible for an FHA loan on a property they intend to occupy as their primary residence​.

If you want to rent out your current home and you need the rent to offset your current mortgage payment to qualify for the new loan, you run into another set of FHA rules. 
In order to count rental income from the departing residence to qualify for the new FHA mortgage, the new home has to be 100+ miles away and you must have 25% in the departing home.

Hi Juan, I'm MLO in Texas and would be happy to help. In addition to FHA, I have a specialty conventional program that offers lower rates but it's limited to specific areas.

Quote from @Jacky Fan:

would HELOAN increase my DTI?

Yes, but it will be offset with the rental income. If your DTI can handle taking your current loan from 3 - 7% +/- while increasing the loan amount, you shouldn't have any problems.

Quote from @Jacky Fan:

LTV is currently at 50%....My understanding I can refi up to 75%.

are you saying don't refi up to 75% if I don't need it?

Take out a HELOC or HELOAN & use the minimal amount you need for a down payment on your new primary residence. For example, As long as you qualify (debt ratio, credit score) you can take out a conventional loan with just 5% down. The HELOC/HELOAN will have the lower closing costs and you're not giving up your 3% rate. That should also keep you cash flowing as a rental.

Quote from @Calvin Peterson:

Hi,

I live in Fort Lauderdale. I am planning to buy a Single Family home by the end of the year and intend on "house hacking" (roommates). I want to put as little down as possible. I'm looking to find a lender who can work with me regarding an FHA loan so that I can, ideally, only put 3.5% down. I have a good credit score (but limited history). Please reach out!

Hi Calvin, I'd be happy to help. In addition to FHA, I have a conventional loan with the option to put as little as 3% down as well a speciality product that has lower rates if the property is in a designated area. You can Google my name VA loans and see my reviews on line.

Quote from @Ryan Ness:

Quote from @John Burke:

A 1 hour commute is not a problem but you may need to provide a letter of explanation. Occupancy fraud is the most common fraud committed in mortgage lending so underwriters look at things like distance from your job as a possible indicator. 

Did you claim the your rental income from your current duplex on your taxes? 

What type of property are you look for now, SFR or multi-unit?
I can lend in all 50 states and would be happy to help you figure out some options.

As it has now been 2 years since the property has been rented, I do claim the income on my taxes. 

I will be interested in multi-family, LTR opportunities that I can househack. If the cash flow of this property could get me beyond what is needed for my cost of living, my current W2 may not be a requirement, and I could make use of my Realtor's license in Indianapolis instead. I know the W2 may be needed for the approval, but I didn't know if there are other options if I needed to step away from the W2.

 IMHO in order to secure the best terms, you'll want to stick with W-2 for the purchase. Once you've had a chance to see how the property performs, you can revisit the idea of giving up your W-2 job.

A 1 hour commute is not a problem but you may need to provide a letter of explanation. Occupancy fraud is the most common fraud committed in mortgage lending so underwriters look at things like distance from your job as a possible indicator. 

Did you claim the your rental income from your current duplex on your taxes? 

What type of property are you look for now, SFR or multi-unit?
I can lend in all 50 states and would be happy to help you figure out some options.