All Forum Posts by: Patrick Roberts

 The FHFA signed a directive today that very possibly may have killed HomeReady/HomePossible. Lenders will be getting updates on this from the GSE's over the next few days. I recommend checking in with your lender to confirm these programs are still available if you plan to use one of them. 

Im in Charleston but our branch is in Columbia in 5 points. Happy to chat or help. We currently have an intern from USC at the branch, which should wrap up at the end of the semester. The budget for the internship is part of a grant that may renew next semester. If it does, Im happy to chat about bringing you on so you can see REI finance from the inside - Conventional loans, DSCR, etc.

You're unlikely to make this work with a 203k loan, which is an FHA product. FHA is only for primary residences, and FHA is very strict on who can provide gifts or be coborrowers. Borrowing the downpayment from others will not fly on any FHA loan unless its coming from some kind of DPA program in the vast majority of cases. Also, using an FHA loan with plans to refi shortly afterward isnt a great plan in general as you will pay 1.75% in UFMIP that will be lost when you refi.

Freddie Mac has a conforming renovation loan product for investment properties, but borrowing the downpayment is unlikely to work. If the downpayment is coming from OPM, they will likely need to be coborrowers on the loan with you. 

If you're able to use hard money for the acquisition and construction costs, this will be much simpler. I would expect a downpayment of 20-25% of the purchase price and probably needing to contribute 10%+ to the rehab budget. Once the project is complete, you can refi with DSCR or conventional for the permanent/take-out loan.

More than likely, the bank that is underwriting the credit line is basing the calcs on a draw period followed by a relatively short amortization/repayment period, such as 15 or 20 years. For instance, $750k @ 8% on 20yrs is $6,273/month, which is almost 49% DTI by itself. Add in $2,000/month on the land payment and you're well over 50% on the backend.

One option would be to settle for a lower limit on the line that would make the DTI work as is. Another option is to look at a cashout refi 30 yr FRM rather than a credit line. This would probably shave around $2k/month out of the payment.

I would ask for details on how they are calculating DTI and what they are including/not including. It may be as simple as waiting until the next year's tax returns are out to include more income (most banks base on Helocs on income reported on tax returns, and most have different guidelines for how it's calculated).

I recommend you have an experienced lender look at this deal prior to purchasing, even if you plan to buy with cash/heloc. Tiny homes are often lumped in with non-traditional housing and may be difficult to refinance after the fact. This is especially true if the property is rural. If there arent comps for that kind of property, you may struggle to refi it when youre ready and may be trapped between keeping the heloc drawn or selling the property. 

In most circumstances with good credit, HomeReady or HomePossible is going to crush FHA from a value standpoint. Generally, the biggest deciding factor between FHA and Conventional is credit. If your FICO is over 700 and especially over 720, Conventional is usually a better option.

Im not aware of any that allow this, but it doesnt mean that they arent out there. Most of the DSCR programs I'm aware of specifically prohibit subordinate financing.

I could be wrong about this, but I remember it coming down to the determination of highest and best use by the appraiser. I had a deal similar to this last year where a borrower wanted to buy a property that was zoned commercial but was effectively a SFR on the edge of a neighborhood that was slowly being rezoned. There were dissenting opinions about it with the underwriter and the risk team, and ultimately we didnt move forward. It's a gray area if I remember correctly. It has a lot to do with the attributes of the property and the area as well.

I think the bigger question is whether the lender will be willing to risk a buyback by funding the loan. This is one of the occasions where the lender's internal policies will absolutely matter. 9 out of 10 lenders may get a NO decision from the risk team, but then 1 will be ok with rolling the dice and risking having to eat the loan if they get hit with a buyback post-sale.

Fannie has a service desk that the lender can call for guidance. That being said, I'd probably try this loan at a local bank that can offer a portfolio option so that they arent as concerned with a buyback.

Quote from @Eric Veronica:

Fannie Mae conventional mortgages allow for the transfer to an LLC as long as the borrowers hold a majority ownership interest in the LLC. Below is a link to the Fannie Mae selling guide illustrating the allowable title transfers. Below that is a snip from the guideline addressing the LLC Transfer.

@Patrick Roberts mentioned that you need 12 months of ownership but I am not familiar with any type of seasoning unless something change recently.

https://servicing-guide.fanniemae.com/svc/d1-4.1-02/allowabl...

 The seasoning comes in when the borrower originally funds it as a primary. I dont believe there is any seasoning if funding as an investment. Could be wrong about that though

 Call the Underwriter is the shop Im most familiar with. What part of Charlotte is this?