All Forum Posts by: Reid Chauvin

Hi @Rufus Johnson Jr - one thing you might consider is refinancing your inherited property to pay off your HELOC balance (plus any other debts if applicable). Will just depend on the rate/terms of the HELOC as to whether or not refinancing will save you some money in interest paid. Feel free to reach out if you want to talk through this!

Hi @Brandt Welch - for what it's worth, the minimum down payment on a 1-unit investment property is 15%. It's 10% down for a '2nd home'. The interest rates have been pretty comparable for those two occupancy types. If you are not willing to employ the 'house hack' method, (i.e., buy a new primary residence w/ low down payment and rent out your current residence), and you have no intention of occupying this next property at all, then purchasing as an investment property is the way to go. 

@Brandon Warren - if you convert it to a STR then you'd need to wait about a year to be able to use the rental income to supplement your DTI (since you'd need a schedule E showing that income). However, if you convert it to a Long-term rental then you could use 75% of the rental income to offset the debt immediately (as all you should need to provide to underwriting is the signed lease and proof of receipt of the security deposit). Not sure if 75% of the LTR rent will be enough to offset your mortgage on the property to a degree that will allow you to qualify to purchase a new primary, but this is an easier option imo if so.

@Andrew Swaim - if you are able to get the prospective investment property leased out, and if the monthly rental income on the property is greater than the mortgage cost of the property (plus taxes, insurance, HOA fees) by a large enough margin then it will not have a negative effect on your DTI. It could even have a positive effect. An underwriter will want to see a signed lease agreement and likely proof of security deposit on the property. They will multiply the agreed upon monthly rent amount by 75% to derive the true rental income (this 75% factors in vacancies and management expenses). The true rental income less the mortgage costs referenced above is the number that will be included as part of your DTI calculation.

I would only use a DSCR loan instead of a conventional loan if you didn't have the income for a strong enough DTI ratio, which it sounds like that is not the case.

@DyQuan Bowers - the nice thing about investment properties is that the rental income can be used to offset the debt in calculating your DTI ratio, generally both in acquiring the property and in acquiring future properties. As long as you are not buying a rental property with negative cash-flow, then the property should have minimal to positive effect on your DTI ratio.

Also, buying a property in your name as opposed to through an LLC is going to offer more advantageous financing for you (i.e., better rates and lower required upfront costs). Some people opt to later flip the title to the property into an LLC after they've purchased it.

Quote from @Rahnesha White:

They had me sign a “rate lock agreement “ the $500 was suppose to be the processing fee to start processing the loan once I signed the rate lock and appraisal waiver for them to get the appraisal and submit everything to underwriting. I signed it and my lender signed. Then two days later my lender told me that the points/ fees they were charging were more than the allotted 5 % that Fannie Mae allows for investment properties. So that’s why he said we have to change the interest rate by giving me a higher rate and lower points to be under the the 5% Fannie Mae requires for conventional loans for points / fees. I responded by saying I didn’t want a higher rate bc I had already signed the rate lock and that they should honor that and instead lower the points for the 6.375 rate that was locked in to be under the 5% Fannie Mae requires but they said no they will only do the higher rate and lower points. Non of this was verbal I have the signed agreement everything signed in writing . I think it was a regulatory constraint my loan officer overlooked when we signed the rate lock he said he wasn’t aware of the 5% Fannie Mae rule. But I feel like that shouldn’t be my problem. I’m just not sure where or who to talk to about it because I’m not sure if the is so common practice to change the rate lock once the loan gets to underwriting and go not honor the agreement and then to not give me my $500.00 processing fees back because I told him I didn’t want to proceed at the increased rate… the rate lock on the initial agreement is until 2/16 not expired 

@Chris Seveney

@Jaron Walling

Based on this context, it doesn't sound like the lender intentionally tried to misrepresent the rate to you. The Fannie Mae rule with the cap on fees is legit, and something that lenders did not have to contend with the past few years but does now crop up on certain loan scenarios on investment properties in our current rate environment. Yes, ideally the lender should have been aware of this rule before telling you they were locking a specific rate, but missing it is probably a relatively common mistake tbh.

If you are in a scenario where you are paying less discount points for a slightly higher rate, I feel that is probably for the best anyway, given that there is a solid chance for refinance opportunities before you even reap the benefits of the lower rate compared to the added cost of discount fees. I personally wouldn't light $500 on fire to switch lenders, if that is what you have already paid and can't get back. 

Just my perspective...good luck with the transaction! 

@Cosme Escamilla - if you are planning on living in the property and renting out the remaining rooms, then it is a primary. If you have no intention of living in the property and will be renting out the entire thing, then that is an investment property. Assuming it is a 1-unit property, your minimum down payment requirement will be 15% if this is an investment property. If this is a primary you can put as little as 3% down - this is why the house-hack strategy is so widely used for beginning RE investors. Good luck! 

Welcome @Timothy Cammack! Assuming you are not buying with cash, my recommendation is to get a good idea of what your financing will look like for your deal before you start spending a bunch of time searching for properties. You will want to know that you can qualify for a loan and also have an idea of what the upfront and monthly costs of the loan will look like for a given price range, property type and strategy. Good luck and feel free to reach out if you have any specific questions! 

Hey @Brad Blank - always happy to see some fellow investors from BR on here! I think in your situation a cash-out refi is going to be your best bet, but can pretty easily analyze what that will look like compared to a HELOC so you can decide for yourself. Feel free to reach out if you'd like to chat further!

@Cortez Baker - you may be eligible for a Conventional Renovation loan here. You would be required to use a general contractor for the renovation. This is a long-term loan, generally people opt for the 30 year fixed rate option, so you'd basically have renovation costs + closing costs (let's say $80k total) amortized over a 30 year period at right around the interest rate that people are getting on investment property loans right now (~7%).