All Forum Posts by: Stephanie Medellin

@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.

@Kristine Mercado  That is a really broad question and will vary from credit union to credit union, and whether they hold loans in their portfolio or sell the loans.

It's very possible that credit unions may not offer hard money loans, fix and flip loans, or bridge loans, since those are specialty loan programs.  

A really general answer to what's required for pre-approvals: lenders typically want to run credit to see your credit history, see bank statements showing your funds for down payment, closing costs, and reserves, and document a minimum of a 2 year income/employment history.

New construction loans and fix and flip loans will also look at your construction or renovation plans and contractor bids.

@Chris Henry - Take @Andrew Postell's advice. There's no point in refinancing out of your very low rate FHA loan, only to find out that you won't be able to get a new FHA loan for your new property because you don't meet the guidelines. You would lose your low rate and not get any benefit from doing so. You might be better off using savings or getting a HELOC or fixed 2nd for your down payment on a new property, and just purchasing the new property with a conventional loan. If you're buying a single family home next, you may only need 5% down for a conventional loan.

@Wilson Hunter  It's a bit of a misconception that you can have a maximum of 10 conventional loans.  The conventional guidelines say you can finance a maximum of ten 1-4 unit residential properties when you're financing a 2nd home or investment property.  If you have 5 residential rentals and take out one loan against all 5, you still have 5 financed 1-4 unit residential properties.  If you have a 1st lien and 2nd lien each on 10 different properties, you still have 10 financed properties, even though you have 20 loans.  

@Devin Janke Are your friends/family planning to lend the entire down payment? If so, you'll need to find a DSCR lender that's OK with 100% CLTV. I've seen programs where gift funds are acceptable for a down payment, but I don't recall any that allow a borrowed down payment. You may have to structure this a bit differently where your private investors are also owners, rather than lenders.

As @Bill B. said, your notarized loan documents are going to have an occupancy statement.  If it's an owner occupied loan, it will say you intend to move in within 60 days, and intend to continue living there for a year after.  If you know you aren't going to intend on living there and need to move, why not just finance it as an investment property?

There are definitely 30 year fixed rate options for investment properties, especially if it's 1-4 units.  You mentioned multifamily, so it's unclear how many units you're trying to finance, but if it's not commercial it should be safe to assume it's 1-4 units?

Yes, it's absolutely possible to use the equity either through a cash out refinance or a second loan (fixed second equity loan or HELOC). Depending on your first interest rate, your total loan balance, and the amount you want to borrow, a HELOC or fixed 2nd loan may make more sense.

Yes, but you will need to own a new primary residence or at least show a housing payment history to be able to count rental income on new loans.