All Forum Posts by: Matt Mayo

Don Chambers Fannie Mae is effectively raising the acceptable DTI to 50% as of July 29th, so depending how far off the buyer is, he may be back in the game next month. Only two ways to fix a DTI problem, and that's to find more income, or get rid of some debt. As Chris mentioned above, he could try FHA as well, but he's not going to get more wiggle room than the 50%. Also, you mentioned it was a flip - keep in mind that FHA requires the new purchase contract date be at least 91 days after the previous sale was recorded. As you've come to find out the hard way, a pre-approval letter by itself doesn't actually mean much, other than the fact that the buyer has found a loan officer willing to put his name on the line for the buyer to shop around. Next time you have a buyer interested, don't hesitate to ask for DU findings or proof of funds in the bank along with their approval letter. It can save you long drawn out headaches like this one.

@Ryan Keenan

Was the house built before or after 1978? 

The main concern is lead based paint. You can have the paint tested by a lead based paint specialist. If the paint is lead based, then you're stuck fixing it. 

VA guidelines require that "The surface requiring treatment must be thoroughly washed, scraped, wirebrushed or otherwise cleaned to remove all cracking, scaling, peeling, chipping and loose paint and then repainted with two coats of a suitable nonleaded paint, or:

The paint shall be completely removed or the surface covered with a suitable material such as gypsum wallboard, plywood or plaster before any painting is undertaken if the paint film integrity of the surface needing treatment cannot be maintained.” 

It doesn't necessarily have to be completed by a licensed contractor, so that could potentially save you some money in the short term. 

Also, are you taking cash out? 

If not, you can refinance using a VA IRRRL, with no appraisal needed.

Ryan Keenan Is the paint chipping on the whole exterior of the house? Usually the appraiser will call out the specific areas that need repairs.

@Account Closed  

Sounds like a great idea! Not sure exactly how long he plans to live in the condo, but 2-4 years in it will give you some decent equity to play with. Once he's done with it, I assume you'll want to either rent it out or sell it. Either path you choose from there, you have to determine how hands-on you want to be.  On one hand, you can find a good property manager to help you market and rent the condo, or a good real estate agent to help you market and sell the condo. On the other hand, you can do all of that yourself too, but there are a lot of potential pitfalls. The trade off of course is money vs work/time, and there is a reason that real estate professionals can make good money...its a lot of work lol. 

It would be good consider the HOA before purchasing any specific condo as well. How much are the HOA dues, how well are their reserves funded, are there any rules specific to this community that will cause problems with your future plans, etc.

Feel free to reach out if you have any more specific questions!

A good mortgage broker will be able to shop around for you to get you the best rates from many different lenders. Without knowing the specifics of your loan, with a credit score like that, you should probably be able to get 4%. 4.125 isn't far off though, and the difference could be account for by any number of factors. Short answer, try maybe one more broker and a bank, get up to date loan estimates from each, and then compare apples to apples.

@Michael Rivera  

There are a lot of factors when it comes to determining the interest rate that a borrower can get for a mortgage. On any given day, depending on the market and your own personal situation, there is a range of interest rates that would be practical to apply to a given mortgage. It really comes down to a balance between rates and costs. Lenders offer what is called a Yield Spread Premium, which increases along with rates. The YSP typically covers the broker's commission (which can vary from broker to broker), and if there is anything left over, it goes towards closing costs. 

The ideal situation is minimizing both your rate, and your (out of pocket) fees, so the sweet spot gives you enough lender credit to cover your mortgage broker's commission, and as much of your closing costs as possible, without raising your interest rate too much. 

So for the short answer, you can negotiate...to an extent.

As far as what documents are required, you will need to provide income documentation (tax returns, pay-stubs, P&L if self-employed, etc), identification, and purchase documentation (purchase contract & counter-offers). Just noticed you're in Canada, I would imagine that it is pretty similar to here in California.

Hi @Brian Boren

Not sure if you've found your answer yet, but yes you can rent out the home while still paying PMI or MIP (FHA), and before reaching 80% LTV.

Keep in mind, that you can only have one FHA loan at a time though.*

*there's almost always a "*" lol. 

@Eric Paul Depending on a few things (your interest rate, your Mortgage Insurance Premium, your Loan-to-Value, credit score, etc) you may not be sacrificing cash flow by switching from FHA to conventional. Let's say you have a 3.75% interest rate currently on your FHA loan. In addition to that, you are paying probably .8-.85% in mortgage insurance premium (possibly even more, depending on when you got your loan). That brings the rate that you're actually paying above 4.5%

As of today (without knowing any of your specifics), you can probably get into an owner-occupied conventional loan closer to 4%. Of course, if you dont have 20% equity built up yet, you'll still have to pay mortgage insurance. On a conventional loan however, once you reach 80% LTV, you can have that removed, whereas on an FHA loan the mortgage insurance is for the life of the loan (unless you put down 10%, then its for 11 years...depending on when you purchased). As you can see, there are a lot of caveats and exceptions when it comes to mortgages lol. Each situation is always a little different.

After I typed these two paragraphs, I realized that you had mentioned you wanted to convert it to a rental lol. So on a conventional loan for an investment property, your rate would be closer to 4.5%. One other thing to consider is that if you do convert to conventional on your current home, you would be able to use an FHA loan to purchase your next home.