All Forum Posts by: Patrick Roberts

Personal financial statements are primarily a bank thing. These are typically not required for Conventional/Govt loans - we get what we need for assets, income, and credit relative to each loan and that's it. For specialty programs, these may be required. 

I get this question a ton, also. I'm not sure why there's such a big misunderstanding around these. Very, very few residential RE loans allow nonrecourse.

Once you're 18 with two years of job history, you can start by househacking with a primary and renting out any spare rooms or part of the house. In the meantime, stay focused on two things - piling up cash and upskilling. 

For the upskilling part, start attending the local REI meetups in BR. Red Stick REIA is probably the largest, and The RING is the other. If you're going to go to college, start preparing for that. If not, start learning a trade if you aren't already (electrician, HVAC, plumber, etc). Trade skills are lucrative these days, can easily lead to you building your own business, and will put you miles ahead when it comes to flips and rehabs on properties. If you want to be more on the knowledge/digital side of skill, marketing is a good place to start. Marketing is core to every business in existence and is critically important in RE. These are just suggestions - find some overlap between your interests and your natural talents, and then figure out where that aligns in the market.

As someone else said, continue to soak up as much knowledge and info as you can - reading, podcasts, etc. You're absolutely on the right path. 

I'm from BR. DM me if I can help - more than happy to help where I can. 

For Conventional, there is no percentage/factor reduction where there is historical income figures to work with (reported a tax form)- the figures from the tax return are used. For DSCR loans, this literally varies by lender and by rental type (LTR, STR).

For Conventional, there are two basic ways that income is evaluated - properties being placed into service (such as a new property being purchased), and properties already in service. For properties being placed into service for the first time, 75% for the gross rent (based on the appraisal/1007) is used. 25% is assumed as expenses/vacancy. 

For properties already in service, the bottom line on Sched E (or however you're reporting) is used. Start with the bottom line, then add back mortgage interest, property taxes/ insurance/HOA fees (assuming they are escrowed), and any noncash and onetime/extraordinary expenses, such as depreciation. Once you have this figure, net it against the mortgage payment for that property (if there is one). If the net figure is positive, meaning there is positive cashflow, it's added to your gross monthly income. If it's negative, it's considered to be a liability/debt and feeds into your DTI. If there is no mortgage payment at present, escrow items are not added back in the above explanation.

It's more nuanced than this and there are many exceptions/caveats, but this gives a high-level explanation. 

For DSCR loans, in most cases, the raw rental income is used, whether based on the rental appraisal (1007) or an actual lease. Some lenders compare this to only the actual mortgage payment and some include an expense factor. DTI and personal income are not considered.

 No problem. Sounds like you're in good shape. Give me a call if you want me to take a look at this. 

 Yeah I was curious and looked at it a while back as I live not far from it. It would probably be cheaper to have materials dropped on the lot from above by a CH53 than to have them carried in lol.

This is perfectly fine. As long as you intend to live in the property as your primary residence, then a primary residence mortgage is appropriate. You wont be able to use the potential boarder income to qualify unless part of the property is an ADU, so you'll need to be able to qualify on your own income.

As far as the reporting goes, the rental income and losses will most likely be reported on your Schedule E - speak with a tax professional who has expertise in real estate. I recommend putting a lease in place - if things go sideways, you'll have to get an eviction for the boarder(s) regardless of whether or they've signed a lease. 

For your rinse and repeat househack plans, discuss this with a knowledgeable lender. Each loan product type has different rules and restrictions for using rental income to qualify for new purchase, and some can wreck your plans (such as the FHA 100-mile rule).

I feel you on this. I live downtown CHS. Our house sits on a 30x60 lot and is "normal" for our neighborhood. There's currently an infill lot for sale on Catfiddle for $350k and the entire lot is 1,300 sqft.  

 Check to see whether the tax authority's assessment of the property value is reasonable. It could be this was a standard periodic reassessment to account for market value increases and there's nothing to fight. I'm not super familiar with TX, but an area of Louisiana that I work is currently in a reassessment year and a lot of people I know are getting sticker shock from tax increases. 

Also, check whether there was an escrow shortage when taxes were last paid by the servicer. If the taxes were increased and the escrows that were collected up to that point were insufficient to cover the new tax bill, then your future mortgage payment will increase by an amount that will cover the new tax bill AND make up for the shortage from the previous payment. Once the shortage is repaid, the monthly payment will drop by a corresponding amount. This is commonly repaid over a one year period.

To clarify with an overly-simple example- you said $600/month in an increase. It's possible that the annual tax bill increased by $3,600.00/year, and there was a shortage of that amount when the bill was paid. Going forward, the tax escrow component of your mortgage payment increased by $600. $300 is to escrow for the new annual tax bill, and another $300 is to repay the $3,600 shortage that the servicer paid on your behalf previously. Once the shortage has been repaid, the payment will be adjusted again and the $300 shortage repayment component will be removed. I don't know if this is what happened, but I see this scenario a lot. A quick call to your servicer will clarify.