All Forum Posts by: Linda Garcia

You would only be able to offset the current payment if you used a conventional loan on the new home.  

49% is a very common DTI where I do loans (in a VERY high cost area), so that typically shouldn't be a barrier. You would want to be sure your lender is inputting all of your assets to make the file stronger. Typically we only put in what is needed (underwriters like to scour and question, so the less there is to scour, the easier the conditions are on a borrower), but adding extra money into the mix can sometimes do the trick to overcome any objections the automated underwriting system is having. Pull out all those old 401ks from other companies that don't have much it it...they all add up. Some lenders have their own stricter guidelines as well, called overlays, so even though you might get an automated underwriting approval up to 52 (which I have before), their company won't do the loan.

The other thing you can do is pay off debts at closing (paying off beforehand can be a messy trail of paperwork-it's usually better to wait. I'm working on one that paid off so mich debt in the middle of the transaction that it has delayed our closing!!!). If you have 2000 in credit card debt that is making your ratios too high, see which debts you could realistically pay off and then they can be excluded from your DTI. Sometimes this can get your DTI down to a point that can change a no to a yes.

Obviously I don't know your whole situation and what other obstacles, if any, there could be. These are just small tricks that a lot of inexperienced people don't know, or have put in the effort to try, which is why it's always good to find us old timers who have been around the block a few times. Lol. 

Do you mind messaging me your favorite wholesalers? I was having the same feeling as the OP but I chalked it up to inexperience.  I really want to do another house but everything right now is making me weary. 

Yes, you can! It sounds like you may meet the first requirement-being able to show that your current living arrangements no longer work for your family.  My borrower that did this wrote a letter stating that when she originally purchased her 1000 square foot 2 bedroom townhouse, she was the only person living there.  She also had twins and got married, and took in a parent and explained that they now need the home they were buying because it had 4 bedrooms and was 2500 square feet.  She provided tax returns to show her increase in dependents.

Here's the big catch.  Your current home needs to be at 75% loan to value or less.  The lender will order an appraisal and you can pay down your loan to 75 if it hasn't appreciated enough in value.

There are other options, such as a conventional loan with 3% down or other down payment assistance programs (not all require you to be a first time homebuyer). If the builder is wanting you to use their in house lender and they don't have any of those products in their product line, you can negotiate to keep the closing cost credit because their lender can't perform.  Some in house lenders only have vanilla 30 year fixed products and that doesn't work for everyone.  I'm sure in this market, they would rather wheel and deal than lose the deal altogether.

Good luck!

Hi Maddy! I haven't done any rehab loans lately, but in general, yes they are more expensive.  On top of an investment property having a higher rate and down payment requirement, a conventional construction loan will come with more points and fees due to risk.  The lender has to pay for inspections, title updates, loan servicing, etc that a typical loan doesn't have, and these are of course passed on to you. If you want to go with private money, the rate will likely be even higher but you might have less fees and restrictions on using the funds.  You would need to put some feelers out to some hard money lenders and see what they would be willing to give you based on your plan for improvements.  

You could also consider finding a property that is just dated but doesn't have anything that HAS to be done.  Then you can tackle a few of the most desired upgrades first, as your budget allows, and add more upgrades between tenants.

It's technically possible, but think of it from the other side.  If you stopped making the payments, they would have no recourse.  They could owe hundreds of thousands of dollars and would need to make payments on something they don't own in order to not ruin their own credit.  I'm not implying that it would be something you would do, but life throws curveballs and ruin plans (who knew there would be a pandemic who put millions out of work?).  It would be very unwise for someone to do so.  There are alternative programs out there that can work with credit issues, foreclosures, having multiple properties, qualifying on rental income only, etc.  The rate will be reflective of it being a higher risk loan for the lender, but it's still a loan if you really want one.  Why can you not just use your own credit?  

I'm not sure where you live, but there are also other down payment assistance programs out there.  For instance, here in CA, we can do a 3% down loan with a 3.5% 2nd lien and a 2 or 3% 3rd lien to help cover the closing costs, and they just released a forgiveable loan that is income dependent.  There may be something similiar in your state.

Also, there are additional rules regarding a 3-4 unit FHA property as far as how much it has to rent for vs. what your mortgage payment is, so make sure you are aware of the differences if you're looking to do more than 2 units.

Why is it that you don't feel like you can qualify for a loan?

I want to be sure you are clear on an FHA loan for a 3-4 unit. FHA requires that a 3 or 4 unit property be self sufficient. On top of that, you can only use 75% of the estimated gross rents as determined by an appraiser (although you do get use the estimated rents for the unit you would owner occupy). In other words, if the property makes 4,000 in estimated gross rents (1,000 per unit), we could use only 3,000 as the estimated rents. If your mortgage payment is 3,100 (including taxes, insurance, MI, any HOA dues, etc), that property will not qualify for FHA because the payment is greater than qualifying rents. I have never been able to qualify anyone on a 3-4 unit for FHA on the west coast, but I'm sure in some markets it would work.

While on the topic of loan programs, it's important to know that just because FHA (or other investor) says you can do a loan with XYZ characteristic, doesn't mean every lender does. Lenders have what are called "overlays" and they are basically stricter internal guidelines that have to be met. While one bank will do a loan with a 580 credit score, another may have an overlay that their minimum credit score is 620. One may finance mobile homes with FHA while another will not. One may do the construction 203k or Homestyle or portfolio construction loans/rehab loans, others may not.

Also, you mentioned several times about lenders in Maine.  Many companies, especially the ones that could help you with alternative loan programs, are licenced in multiple states or nationwide and US territories.  I wouldn't necessarily narrow down your lender search to the person you like best in the area you are looking at.  There are SO MANY lenders nationwide to choose from(though in this market, the ones that were in it for the easy refinance boom money will be leaving any time now).  I want to also add, that before taking the plunge, I would recommend using a company associated with a bank.  While all of us in lending are taking a beating with the interest rates as they are, the ones not associated with a bank have a greater chance of not being there the day you need to close because they don't have the balance sheet diversification to continue business.  

AND...(I feel like I keep talking), I remember doing a loan very similiar to yours with someone who lived in the UK.  I don't remember the card she had, but it was a Visa/Mastercard/AMEX- one of the big ones here in the states.  We were able to order an international credit supplement from them to add to her credit history.  Do you have one of these that could help?

I am personally on the "rent for six months to a year to get your bearings" train.  Imagine how horrible it would be to buy a property you later find out is in an area is completely not your style, especially given the differences in weather.  Experience a Maine winter first!

Good luck and let me know if you have any questions about my rambling response!

It sounds like you would be looking to essentially assume the note, which would be a loan by loan sitution. Some loans are assumable (i.e. VA) while most others are not- you would have to read the terms of the Note. If it's a loan the bank holds on their own books, they may be able to be more flexible on this, especially if it's a situation where the home is under water and they stand to lose a lot of money.