All Forum Posts by: Stephanie Medellin

@Dylan S. 3% down will work on a single family home, but for 2 units you'll need a minimum of 15% down - that's why many people turn to FHA when purchasing units. One strategy may be to buy a single family home with an accessory unit or guest house. It's treated as a single family home for lending purposes (and you won't be able to count rental income), but you can rent out the guest house for additional income after closing.

Home Possible is a program that allows 5% down on 2 units if you're under the income limit for your county, but Orange County's limit is $68,880, so that's probably not an option unless you earn commission or overtime that's not used.  You would also typically add the rental income to your total income, which usually puts people over the limit in high cost areas. 

Lenders will also want a 2 year work history (either college or a previous job) in addition to your current job.

You can use it right away.  It's perfectly fine to use funds borrowed against another property as a down payment.  Now if you just cashed out from your primary residence and want to buy a new primary residence, that will be a problem, but it sounds like this is a rental.  

@George Paquette  Yes, 80% is possible, but it won't be a conventional loan.  Where is the property located? 

@Mason Yost  Standard closing documents say that you will move into the home within 60 days, and will continue to live there for at least a year.  If you move out after a year,  you do not need to refinance.

@Cory Lucas  It actually sounds like a really good deal.  If there is an additional transaction cost (usually 3-4% with 0% offers), be sure to factor that in.  

One thing to consider is how many other credit cards and credit lines you have open.  Maxing out your only two cards with a relatively limited credit history can do some damage to your credit score until the balances are paid off.  Once they're paid, your score will go back up.  If you have 10 other cards with large credit limits, it probably won't affect your score as much.  Just something to be aware of.  

I've seen people with previously good credit get into the trap of financing repairs or improvements on credit cards.  When they try to refinance a mortgage with that additional debt, their score is lower and they won't qualify for the best rates on a mortgage.

@Justin McElroy  I think most lenders who will be financing construction costs along with the purchase will need contractor bids as part of the loan application, and you may need approved building permits before closing.  Those things will likely take the most time.  You should really have an easier time finding a construction loan for a primary residence vs an investment, so that is an advantage.  

Is this a primary residence, vacation home, or investment?  On permanent foundation?  Owned land or leased land?  What is the value vs loan amount?

@Marcus Holloway You will not be able to get additional cash out from this transaction, you will only be able to pay off the owner after 12 months of payments. Since you mentioned BRRR (which usually includes getting cash out?) I think this may be your problem. You need to make sure any new lender does not have an overlay saying land contracts are ineligible.

@Chris K. Even DSCR loans typically use market rents determined by an appraiser based on long term rental rates. On purchases, lenders won't usually consider expected short term rental revenue, even if the seller has a history of it. Think about it this way - short term rentals are more like running a business from the property, and each owner will run their business a little differently. The new owner may not be able to achieve the same STR revenue, so lenders are going to go off of standard long term market rents in the area instead.

Refinances are a different story - once you have a history of short term rental income, some lenders will use that.

There are DSCR programs that will qualify you based on an interest only payment. That's one way around a low rental estimate on a purchase.