All Forum Posts by: Stephan L Schnaiter

FHA will have better rates but higher PMI, and the PMI will remain for the life of the loan.

HomePossible and HomeReady have lower PMI that can come off when you have 20% equity. If your credit scores are good, the Conventional option may be a similar payment in the short term and better cash flow in the long term.

The fact that it is zoned commercial is not a deal-killer by itself, if, as you say, it is grandfathered and could be rebuilt as a residential property. However, the appraiser must comment on any adverse effect the non-conforming use has on value, and whether the present use represents the highest and best use of the property.  

That is for Freddie Mac (see below).  I think Fannie Mae is the same, but didn't look it up. 
https://guide.freddiemac.com/app/guide/section/5605.4

@David Nunn that is a shopping tool. The APR is the interest rate plus fees like origination fees, discount points, and mortgage insurance, annualized. Your payment will be based off the interest rate--not the APR.

The VA Underwriting Guide says this:

Verification: Rental of the Property Applicant Occupied Prior to the New Loan:

Obtain a copy of the rental agreement on the property, if any.

Use the prospective rental income only to offset the mortgage payment on the rental property and only if there is no indication that the property will be difficult to rent. This rental income may not be included in effective income. Obtain a working knowledge of the local rental market. 

If there is no lease on the property, but the local rental market is very strong, the lender may still consider the prospective rental income for offset purposes.

Yes, you can convert the VA to an investment property and buy another one. Basically, if your first home was purchased for $194K, you probably have VA eligibility for up to another $600kish home. (Fuzzy math--would need to see the details, all the other disclaimers...)

You can use a rental agreement to offset the payment of the home you are departing for underwriting purposes on the new purchase loan. You will need 6 months worth of the payment (including taxes, insurance, HOA) in liquid assets to show an underwriter.

In this case, I would recommend investigating a HELOC for a few reasons:

1. VA Cash Out refi's must demonstrate a Net Tangible Benefit to the veteran, strictly defined by VA, to do one of the following: eliminate PMI, reduce the rate, reduce the term, reduce the payment, increase residual income, renovate or repair your primary residence, convert from ARM to fixed rate, or stay below 90% LTV. (That last one might qualify for what you are trying to do, but you're going to run into some underwriting barriers if you simultaneously increase the rate and payment without a very strong reason--and accessing cash for real estate investment is probably not going to be what they want to see, depending on the lender).

2. Depending on your current rate, it might be beneficial not to refi into a higher rate first mortgage.

3. The HELOC is reusable--you can pay it down and run it back up. I know of an FCU here in SC that will go up to 100% CLTV (First mortgage plus HELOC limit can go to 100% of your appraised value.) Rates are higher, but if your goal is to BRRRR and recoup the funds, that might be acceptable to you for the first few rinse and repeats.

For FHA, the underwriting guide says 75% of the lesser of A.) the leases/rental agreement or B.) the appraisal comp rent schedule. This is an appraisal supplemental form that would need to be supplied with the appraisal in the transaction.