All Forum Posts by: Stephanie Medellin

Many lenders will not finance a unique home, if your goal is to refinance after it's completed.  It would be worthwhile to take your plans to a lender before starting construction, and try to line up one or two potential lenders for after completion who will lend on that type of property.

Keep in mind if a house is really unique, appraisers will have a hard time finding comps for an appraisal.  Also keep in mind that comps are constantly changing.  One similar home that sold 6 months ago (giving you an idea of potential value) may not be a comp when you're finished building and ready to refinance 1 year from now (because it will be too old).  If no other similar homes have sold, you're going to run into problems with financing.  Typically lenders will want 3 similar sales.  

 You can typically pay past due taxes at closing with a refinance, and they can be paid with loan proceeds.  It sounds like it could get messy though if you're suggesting accepting a quit claim deed without recording it with the county (based on comments above)?  You wouldn't be listed as the owner of record when you apply for the refinance.  The title company for the refinance transaction may want affidavits to make sure the prior sale was legitimate.  

I'd definitely advise to proceed only with a title company or closing attorney handling this sale.  Who knows what other liens or title issues the property has.  

It's really not common for a Realtor to have multiple private money lenders available to refer.  When I think of private money, it's going to be a family member or friend that has money to lend, not someone who advertises or lends as a business

  Realtors may know of hard money lenders, or mortgage brokers with sources for non-conventional lending if you or the property cannot qualify for a conventional loan.

If the hard money lender is not sourcing the funds, you could either have your family give you a certified check or wire to transfer the money to your account, or they could do either of those to send the money directly to the closing agent.  If they give you a bank check, make sure your bank won't put a hold on it for a week, pushing you past your closing date.  For that reason, a wire to your account or bringing it directly to closing might be the better choice.

If there's any chance you might keep the property and refinance it once it's remodeled, keep in mind delayed financing (within the first 6 months of ownership) will require you to source the funds used for the purchase.  A personal loan from family can be repaid, but a gift cannot.
  

@Reginald Silva  For an investment property, the amount of reserves will vary based on how many properties you own and how much you have outstanding with other mortgages.

If it's a primary residence, you often don't need reserves.  It will depend on your overall financials, and may be lender specific if they have their own requirements.  

If using a 401(k) as reserves, you probably won't need to withdraw the funds through a loan as long as you have access to the funds.  

@Mike Jay  Are you an employee or an independent contractor?  

There is a loan program that qualifies you based on a verification of employment from your employer only - this might be your best bet.  Bank statement loans are typically for self employed individuals / business owners.  If you truly have a job and are not self employed, a bank statement loan probably won't help you.  

An even better solution would be for your employer to start paying you properly, deducting payroll taxes, issuing a W2 at the end of the year, etc.  Traditional lenders won't count income that can't be documented properly, so any loan you're able to get is going to have a higher rate in exchange for non-traditional qualifying guidelines.  

@Alan Taylor  This may not apply to you, but you mentioned "second home" which is a vacation home. 

Lenders won't be able to use rental income to help you qualify for a vacation home.

If you're trying to use rental income to qualify, you would need to finance the property as an investment.  

@Jast Collum Does the 300k balance include the back payments owed? With a 550k value, a cash out refinance will be capped at 440k. Your 1st + HELOC is 338k, leaving about 100k, less closing costs. Is that going to be enough cash out to pay everything off and make the improvements to your home?

Personally I'd have a hard time turning down 50k in assistance, but restructuring your debt can really simplify your finances, so that's a tough decision. I'd be sure to really explore other personal loan options, a fixed rate second mortgage, or even raising the credit line on your current HELOC before deciding to refi out of the 4.1% and pass up the 50k.

Rates have continued to move up...please make sure you're getting an accurate quote to calculate your numbers. 6% for a cash out refinance at 80% LTV might be a low estimate depending on your credit score. The generic quotes you see on most internet sites don't usually apply to cash out refinances. Once you find out the real payment for taking cash out, then you can evaluate if you're saving enough to make debt consolidation worth it.

@Jill S. If you're considering renting out your current home, how much will your new housing payment be? A housing payment will need to be factored into the DTI.

The current HELOC payment reporting on your credit will be used.

Yes, you should be able to offset the liens on that property with rental income, however, if you're converting your primary residence to a rental, the lender is going to want to know where you're going.  Investment property rates are also going to be higher than a primary residence mortgage, so that might not put you in the best position. 

Depending on how long you've owned the other rentals, the lack of documented rents could definitely bring down your average rental income.

Credit wise is a credit monitoring feature offered through credit cards - I know Capital One offers Credit Wise with Transunion scores.  

A few things: 

There are three credit bureaus - Equifax, Experian, and Transunion.  Each has several different scoring models, and as far as I know none of the free services will provide you the same score as a mortgage lender will pull.

Mortgage lenders pull a credit report with scores from all three bureaus, and they will use the middle score.  You could have a 630 from Transunion, a 740 from Experian, and a 732 from Equifax.  The 732 is your middle score.

Credit scores are required for most mortgage loans purchased or securitized by Fannie Mae. The classic FICO credit score is produced from software developed by Fair Isaac Corporation and is available from the three major credit repositories. Fannie Mae requires the following versions of the classic FICO score for both DU and manually underwritten mortgage loans:

• Equifax Beacon® 5.0;
• Experian®/Fair Isaac Risk Model V2SM; and
• TransUnion FICO® Risk Score, Classic 04

These scores listed above are not provided by Credit Karma or any other free service.

Credit Wise should tell you why your score changed, but maybe it didn't actually change because the way the score is calculated is completely different than your lender's score.  

Even if you have no debt, the closing balance on your credit cards each month is what will report on your credit.  For example, say you have a Chase credit card with a $1000 credit line.  Last month you had a car repair that cost $900, and for convenience, you paid the bill with your Chase card.  You received your monthly statement with a $900, and paid it in full.  However, your credit score was calculated with 90% of your credit line being used for the month ($900 out of $1000).  Having this happen on a few cards with small credit lines can cause your score to drop - temporarily.  If you don't use your cards for a few months and a $0 balance reports, your score will go up.  This is the biggest reason I see for low credit scores when someone has no negative credit history.

Another thing that can cause your score to drop (although I don't know if it would drop 110 points) is for old closed accounts to stop reporting after 7-10 years.  Maybe you had some installment loans that have been paid off for 7 years, and they're no longer reporting.  That would be a positive tradeline no longer being factored in to your score.