All Forum Posts by: Jon Puente

This is not fraud at all. You can buy an INV property and rent it for 1 year and then move into it as a primary. Second home works too. DSCR works too! PPP makes no difference other than he has a penalty at the end. Ever heard of a 1YR PPP or no PPP? Both are options.

You began to assume a list of reasons that "won't work".  Unless you have Min's 1003, you don't know his situation, and neither do I.  He is not under contract and we are not in underwriting.  What if he makes 400K/year and is a multimillionaire?  

I am helping him think outside the box of ways he could accomplish what he wants to do.  I have never and will never commit fraud.  I have helped clients NOT commit fraud from other bogus lenders recommending things that are not allowed. I disclose everything upfront including advantages and disadvantages.  

Here is a real example of mortgage fraud - Buying as a primary and not moving into it for 9 months. Or buying it as a primary and then renting it out as an LTR or STR.

Thanks!

 Its actually not lol.  He could easily buy this as an INV property, throw a tenant in there for 1 year and then move when ready.  Or he could do it as a 2nd home (if he owns a current primary).  If he refi's after 12 months, Fannie/Freddie dont care.   

The true fraud would be buying as a primary today and not occupying for 9 months. 

Hey Min, 

Can you buy the property in advance as an "investment property" and then when you officially make the move, you can refinance it into a primary residence at much lower interest rates?

You cannot buy a property as a "primary residence" unless you plan on occupying the property within 60 days of closing, and it sounds like you may not be able to make that happen. 

Great Question!

Hey William, 

Yes, all lenders can do rate buydowns.  Here is the breakdown (for beginners) -  

You can pay "Points" to reduce your interest rate. One Point is 1% of the loan amount, so if your loan is 300K, then one point would be 3K.   For every point you pay, it can reduce your interest rate approx .25%.   

The tough part about what you are talking about is that rates on a primary home are better than rates on INV properties.  5.75% is a great primary rate (especially right now).  INV property rates are at least 1% higher than that, especially for condo's.  If your deal won't work because of the rate, it's most likely not a great deal. 

Great Question!

Hey Britney, 

I have a friend who lives in The Villages (north of Orlando) and you can get a great deal on a home there.  Home prices and insurance are very inexpensive compared to most areas. 

Hey Christine, 

This would seem like a simple answer, but it's not.  In general, you should get 1.5x-2x what you could get for LTR gross rents.  Vacancy can vary, but if you work with a good property manager, you shouldn't have your property vacant longer than 60 days out of the year. 

Great Question!

Hey Quynh, 

It depends on what your goals are for the property. Are you wanting to do some rehab and bring the value and rents up and then rent it out? If so, you would need private/hard money so you can do renovations, and then AFTER you would do more of a permanent solution like a DSCR.

But if its pretty close to move in ready, then DSCR is your option. As long as your gross rents (per appraiser) cover your PITIA payment, then you will be good, especially with that down payment.

Great Question!

Hey Ryan,

Yes, they are.  I almost always recommend 25% down (if you have it available) vs 20% down.  Plus, the cashflow is a lot better.

When people compare rates, what they are referring to is how much the cost is in "points" for that rate.  The rate can be the same with 20% or 25% down, but the cost for that rate will be much less with 25% down.  

You are correct that the lowest for INV properties is 15%, but the cost in points for that rate will be significantly more than 20% or 25% down.  Its all about risk to the lender, which is why more leverage costs more money.

Hey Luna,

I would not buy down your interest rate permanently.  Rates are set to come down in the next 12 months and it would be a waste to spend thousands on buying points when you can refi later. 

As far as the down payment %, that is totally up to you. 20% would avoid PMI, but even if you did 10% with good credit, PMI isn't that much (probably less than $100/month). If you want to use the extra money for another investment, then do 10% down. But if you have no use for the money, then do 20%.

Also think about items you can upgrade or repair in the house to force appreciation, so that when you refinance down the road, you have a better LTV (equity) position and you can get even better rates at 75% or 70% LTV.

Great Question!

Hey Dan, 

Have your lender price out at different LTV's and see if that helps (instead of getting the max cashout). I dont know what the value is of that property, but try 70% LTV and 60% LTV and see if that helps the interest rate (it should).

Likewise, your payment will be slightly lower and you can continue to cashflow more and still get some extra money to reinvest. HELOC is another option too as long as your DTI can support it.

Great Question!