All Forum Posts by: Sasha Mohammed

@Grayson Gist, there sure is! 

The main one is the AMI. Home Possible not only has minimum income requirements to qualify for the loan (with DTI), they also have income CAPS which LIMIT the amount of income you CAN make in order to qualify for the program.

The purpose of this program was to assist underserved areas obtain financing, and in-turn, increase the sales volume in those areas. 

here's a link you can plug in a property address and see what the AMI is -- if it says "No AMI" or "no income limit", then there is NO CAP. Otherwise, it will indicate an income limit which you cannot exceed in order to qualify.

https://sf.freddiemac.com/working-with-us/affordable-lending/home-possible-eligibility-map

disclaimer - fannie mae has a program very similar, which they are making changes to effective July. I'm not sure how long the Freddie Mac (home possible) will be available, typically one follows the other in changes.

Hope this helps, sorry for the length. 

@Jake Beauchamp your age should have zero to do with RE Investing. your experience, however, may play a role in the rates/ terms you qualify for. As will your credit score. 

since you're looking to do investment properties, the biggest hurdle will be coming up with the down payment. investment properties typically require more down. the benefit, however, is that you don't always need to "qualify" for the loan based on your income. Many lenders who specialize in investment-funding will qualify the property itself based on the cash-flow it brings in, as opposed to your personal income and DTI.

What that means is, they look at the rents received on the property up against the cost to own the property (the mortgage debt, the taxes, insurance, maintenance/repairs , etc.) -- if the property cash-flows positive (there is some criteria with this), you should be able to obtain a loan without even providing tax returns and such. 

I will offer a disclaimer: rates and terms will be significantly better if you CAN qualify with income. but it's not mandatory for what you're trying to do. 

Hope this helps!

@Stephen Spain home possible would be the best option IMO for this scenario. 

FHA also has a "self sustainability" guideline on 3 and 4 unit properties -- the rental income from the other units would need to cover the mortgage payment, taxes, insurance, and PMI 100% in order to go. In addition to the non-occupying co-borrower you mentioned above. FHA is simply not a good fit for what you're trying to do.

HP allows for 5% down. The catch with HP is that you need minimum income to qualify for the loan, BUT there are also MAXIMUM income limits to qualify for the home possible low-down program. this is called "AMI". This can be checked by plugging-in the property address to the link below:

http://www.freddiemac.com/homepossible/eligibility.html

If you can find a suitable property that does not have an AMI cap (no income limit), you should be good to go with 5% down. 

depends who you ask :) it is tough, though. they use tricky verbiage to stump you, and i recall the answer options being very similar, where two COULD be correct. The kicker is, when you finish the test, they don't give you a score. Just a "pass" or "fail", so you don't know where you need the help. 

I suggest signing up for a crash-course right before the big test. The education material and classes often don't correlate to the test-material, there are a lot of gaps that would in-theory be filled-in by industry experience (catch-22?). 

The crash-course is tailored specifically for the purposes of helping you pass. I'm pretty sure i signed up for one that offered to pay my retest costs if i failed -- I passed on 1st shot. But i do remember feeling wholly unprepared to test that morning. 

They are extremely difficult. I've attempted on a few occasions, ultimately none closed. I avoid these like the plague now, it's just a waste of everyone's time. 

There are lenders out there specifically tailored to rehabbing properties. You'll need a much higher level of liquidity and experience, but they will finance above 100% of the as-is value (something like 80% of the acquisition, and up-to 100% of the rehab budget, but not exceeding 75% of the After-repair-value). 

Rates are higher, too, but the ease of use is a game-changer for more sophisticated investors. No tax returns (in a lot of cases), no income verification -- they're only looking at your experience, your liquidity, and the property (current as-is value, rehab budget, and ARV).

@Grayson Gist - as others have mentioned, it would be smarter to refi out of your VA loan to free up your VA entitlement.

FHA has a "self sustainability" guideline on 3 and 4 unit properties -- this means the property itself needs to generate enough income from of the other 2 or 3 units (other than the one you're living in) to cover the carrying-costs of the property 100% (mtg, taxes, insurance, PMI).

If you're adamant about keeping your VA loan in-place, it may be beneficial to look into Home Possible (for low-down options) instead of FHA -- i think HP is at 5% down on 3 and 4 unit properties.

Your age should have ZERO to do with this, @Christopher Valerio. I'm so sorry that's been your experience so far!

It would make more sense that you're being denied based on length of time as self-employed, income, credit, etc. rather than age alone. I'm making an assumption here (correct me if i'm wrong) -- as a RE agent, you write off most of your income? Therefore when it comes to qualifying for a loan, you don't meet the DTI requirements to qualify?

You may have better luck going with a commercial lender (don't panic, they're rates aren't THAT bad) where they qualify you based off the income generated from the property. You'll have to put a bit more down than you would with consumer financing, but as long as the property cash-flows after all the expenses/ carrying costs, you should qualify, 19 years old or not. 

Wishing you the absolute best of luck! Stoked to see young people in this industry who are hungry and diving in head-first :)

I'm not sure why you've been having so much trouble, @Amy Thatcher. sounds like you've been on title for quite some time, and you've been making the mortgage payments from your account also for quite some time, plus you can document a blood-relationship with the original note-holder... this meets continuity of obligation many times over. 

Traditional lenders should be able to refinance this debt into your name solely, so long as you qualify for the new mortgage with income/ credit requirements. They may  ask you to document 12 month's mortgage payments being paid, and a copy of your father's death cert. 

it sounds to me you've just been running into a few people who don't know what they're doing. this should be a walk in the park!

I'm with @Chris Mason on this one -- let us know when it funds!

@Daniel D. Step 1 - find a project that would garner a return. If you rehab it and plan to keep it, the end result is the same -- you still have to pay off the investor. If the rehab doesn't add enough value to pay your guy off and still be in the green, it doesn't seem like much of a deal to me. 

Most lenders won't go off of actual appraised value after only 2-3 months, they'll go off of the purchase price. so that's another factor you need to take into consideration if you're planning to go down this road. most will give actual value after 12 months, if you're lucky after 6 months. And still, you might only be able to get something like 75% of the value on a loan. does that pay off what you owe to the investor?

since you plan to keep it, the numbers you need to run are 2-fold. The acquisition cost, rehab cost, loan cost (private money guy, he'll probably want a monthly IO payment at minimum for those 2-3 months)... along with the ARV and what you could realistically get in cash-out proceeds with a refi once the project is done. THEN you need to look at how much is the property going to bring-in in rents from a prospective tenant, and will it still be cash-flowing with the loan i just took out to pay off my investor?

Already it seems those numbers are very tight, just based on your posts above. I don't want to be the nay-sayer, but it doesn't seem like this specific project is a good deal. That's not to say the way you're going about it is wrong or bad. 

If you have someone that would be willing to put up 100% of the acquisition and rehab, that's awesome! just make sure you don't over-extend, and that you have a CLEAR exit-strategy, otherwise that dude is going to foreclose and take the property from you entirely. he might not even thank you for cleaning it up for him.

@John H. -- Different schools of thought on this. No "right" answer. My thought is, if the property cash-flows with a mortgage, I would rather stretch my cash to multiple properties than to have one property super cash-flowing. 

I took a peek at your breakdown. where in the world are you finding a property for $230k that brings in over $4800 per month??? That's AWESOME! And if these numbers are accurate, who cares if you have a $1000 mortgage? the tenants are paying for it and THEN some. put down the minimum, find the lowest rate you can, finance the rest, and use the rest of your cash to find another one (or ten) just like this!

if you're spending $1000 a month to save $125k in cash ($230k minus $80k down minus $25k for repair)... it would take you 125 months to recoup your $125k if you didn't have the mortgage. (kind of a simplistic breakdown, but hopefully you understand what i'm trying to say).

My opinion, anyway. The benefit to buying in cash is that you can offer a quick close with no contingencies. Sellers like that. But if you do go this route, i would still recommend refinancing later and getting your cash back to continue investing. it seems silly to me to have all your capital tied up in one property. 

Following this thread to see how others respond.