All Forum Posts by: Patrick Roberts

Yeah, because all of the temporary buydowns over the past 2-3 years have worked out so well "since rates are coming down next year." Been hearing that since 2022. "Marry the house, date the rate" lol.

If you get another FHA loan, you will have to pay UFMIP again. This is 1.75% of the loan amount. You will get a partial refund on the current UFMIP that you are going pay at the current closing, but it will not be a full refund. I seriously doubt the lender credit will cover this delta in UFMIP and also the lender fees. It also wouldnt surprise me if the "lender credit" you will get is the partial refund of the UFMIP. I have seen unethical lenders do this - they call the UFMIP refund a "lender credit" and then gloss over the fact that youre paying UFMIP all over again because it's being added to your loan balance rather than paid for at closing.

Also, monthly mortgage insurance (MI) on FHA loans is permanent unless you put down 10%+, so you will eventually be looking at a third refi at some point to get rid of the monthly MI, which is 0.55%. For simplicity, just add 0.55% to your note rate to grasp the full impact.

If this was my loan, I would ask the lender to apply the credit for the temp buydown toward a permanent buydown instead, then would use whatever you anticipate spending in the next 6 months on a future refi to buy the rate down even more, and let that ride for a while until you build equity in the property and increase your credit score. This would likely get you well below the current 6.125% youre being quoted on the fully-indexed rate, and would eliminate the need to pay for another loan/closing within a few months. It would also hedge your risk that rates do not drop meaningfully, which is just as likely as rates coming down.

Using your logic that rates are certain to drop enough to justify a refi within the next year, you should be taking a higher, above-market rate in return for a lender credit, rather than paying extra (through the opportunity cost of the lender paid temp buydown) for a lower rate. To be clear, I do not recommend doing this, but that would be the logical move if you believe you will refi in 6-12 months. Get a lender credit to cover all or most of your closing costs now, and then when rates drop, pay for a refi to get the final, lower rate. The risk in this is that rates dont drop and youre stuck with the higher rate for the foreseeable future. 

Do you currently live in this property? If so, there is 0 reason to use a DSCR in this scenario. For one, you cannot use DSCR loans on a property that you occupy, and on top of that, a DSCR loan will almost always be more expensive than a comparable Conventional loan, especially if the Conv loan is a primary residence loan and not an investment property loan. If you do not live in the property, then a primary residence loan is off the table as it's an investment property and not a primary residence.

I would refi now since you have to the opportunity to both lower your rate significantly as well as extract cash from the equity. From a quick glance, you could probably cashout $100k and still pay the same or less than you pay now with the decrease in the rate. 

As far as the Heloc goes, the question is really about how frequently the money would be in use. If you think the cash you could pull out would constantly be in use/deployed, then the cashout refi makes more sense. If you will only use the cash periodically and for short periods, I would lean towards the Heloc. Another consideration is that Heloc lines can be converted, frozen, or cancelled, whereas a cashout refi is permanent. 

There is 0 reason to spread extra principal payments across all of your properties equally. You should not be prepaying any principal at all on the low rate loans. Each dollar of prepaid principal should have a strategic reason behind it, such as getting a particular loan/property down to a certain LTV for a future refi or a recast. Outside of that, pay any extra principal toward the loan with the highest rate.

I'm not a fan of owning investment RE without using debt. Leverage is the primary tool that makes RE an excellent asset class. 

I would personally apply any extra principal to the loan with the highest rate. Up to you, though. 

I dont think you will have an issue here. As far as Im aware, the UW will check that the first month's rent and the security deposit have been deposited/received to allow the use of rental income. I dont remember the guidelines requiring any continuity on the security deposit. 

Worst case scenario, I expect that an LOE would suffice. 

Make sure you're familiar with property taxes in SC. The tax rate for investment properties or non-owner occupied are much higher than the rates on legal residences. That being said, Columbia and West Columbia are still relatively decent markets for rentals. 

FICO 2, 4, 5 are the models most often used by mortgage lenders, including DSCR loans. FICO 8 is what you get with more legit consumer apps. Typically, FICO 8 will be 2-5% higher than the mortgage models, but this can vary heavily given the circumstances. If youre getting your score from credit karma or the app for your credit card provider, youre probably getting vantgage 3.0 or 4.0. These are heavily inflated compared to FICO 2, 4, and 5. I've seen vantage scores be as much as 100 points higher than mortgage models. All depends on the depth and mix of the trades.

What's the plan for if the underlying lien gets accelerated? If the seller has to sell their wrap note to pay off the underlying lien, they're going to take a massive discount at note rate of 4.5%. They may even have to put money back into the deal to square up. Are you confident they will be able to do this? You will be the one holding the bag if the underlying lien forecloses.

 It's a seller finance wrap on the existing mortgage.

 As well as free college. Strangely though, this "one simple hack" is widely overlooked for some inexplicable reason lol.