All Forum Posts by: Stephanie Medellin

@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.

@Michael Vest If you're going the delayed financing route and using the in-law's HELOC, you specifically do NOT want to have them record anything against the property you're purchasing. Unsecured / personal loans are OK when sourcing funds for delayed financing, but loans secured against the property will prohibit conventional delayed financing. You will need a personal loan agreement. There is no waiting period for a rate and term refinance, but you won't be able to take additional cash out over and above the amount of the lien recorded against the property. You could also wait 6 months.

A good point was mentioned above about qualifying with rental income.  For a purchase loan you can use 75% of market rent.  On a refinance, most lenders are going to want to see a regular lease to use rental income to qualify.  If you're only doing short term bookings, that's going to be a problem.  If you don't need that additional income to qualify that won't matter.

Last point is you'll get slightly more favorable rates on a purchase vs a refinance.

Can you ask to pay for a rush on the appraisal? 

@Dominic Guerra Hi Dominic, DCSR loans are not for owner occupied properties (even if they have more than one unit). Many of the DSCR programs require you to own your primary residence. At the very least, they'll want you to have a stable rental history where it makes sense that you won't be moving into the property, but options are limited for first time buyers.

On purchase loans, your LTV is going to be based on the lower of the sales price or appraised value. So if you're under contract for $100,000 and need an 80% LTV loan, your loan will be $80,000 whether the property appraises for $100,000 or $120,000. The higher appraisal does not help reduce your down payment.

College can count toward work history, but you're going to need a full time W2 / salaried job with stable income to go this route.  100% commission income is going to need a history. 

Hi @Ekaterina Shukh - glad this post is still helping someone 4 years later!  I was suggesting that someone take out the 30k down payment, and 50k additional out of pocket money spent on repairs, for a total of 80k.  In that example, I was imagining that the investor made upgrades and improvements AFTER closing, either with their own funds, a personal loan, credit cards, etc.  

You will want to check property values in the area to make sure that the money you're investing will actually raise your property value.  If you buy an outdated smaller 2bd/1ba home for $150,000 in an area where remodeled 3bd/2ba homes are selling for $300,000, and you know it will cost $50,000 to update the home and add an extra bedroom and bathroom, you can be relatively sure you will be able to recoup your investment.  This is something you should research before buying the property. 

When you apply for a refinance, the lender will order an appraisal to determine the value.  The appraiser will look at the most similar homes closest to your home that have sold recently to determine the value.  Since you've already thoroughly researched property values in the neighborhood, you can be confident that it should appraise for $300,000, allowing you to take a loan of $200,000 (or more) against the property.  You will need to make sure you can qualify for the $200,000+ loan.  This new $200,000 loan will pay off your original $120,000 loan and give you $80,000 cash out (less any closing costs).

The trick with planning this is that the market could change at any time after you purchase your home.  Appraisals typically only look back at sales within the past 12 months.  If you base your research on homes that sold 11 months ago, and take 8 months to remodel the house, those sales will not be relevant anymore by the time you finish.  Also if you're using conventional financing, you will need to wait at least 6 months from your purchase date to use a new appraised value for a new loan.  If sales prices in the local real estate market are increasing, as they are now in much of the country, there is less risk in taking on a project like this.  Hope that helps!

@Maron Faulkner ARM loans are not always easier to qualify for - they usually need you to qualify for the starting interest rate + 2%, or something similar. In other words, they want to know you'll still be able to make payments if the interest rate increases in the future.

Conventional lenders should be using 75% of the estimated rent, less the full monthly payment of the rental property you are purchasing.  If the number is positive, it's added to monthly income.  If it's negative, it's added to liabilities.  Other properties reported on the schedule E are calculated differently.  It sounds like you should get a second opinion from a different loan officer who is more familiar with financing investment properties.

@Jabbar Adesada  You can be on title and not on the mortgage, but the person who is taking out the mortgage also needs to be on title, and stay on title.  If not, then they will be obligated on a mortgage for a property they do not own.  Most lenders will not be OK with this.  

@Clayton Hepler  Homestyle is available for 3-4 units on a primary residence, but still requires 25% down for 3-4 units.

When applying for loans, don't refer to a house you intend to live in as an investment property.  Even if it has more than one unit, it's still considered a primary residence for lending purposes.  That will prevent some confusion with your loan officer.

@Ralph Noack  What does the agreement say?  If it says the first installment is only supposed to be a certain amount, notify the investor and his or her lawyer, and arrange to wire back the amount that was sent in error.

@Dale Johanssen  Everything in the "Paid by Others" column is being paid by the lender, totaling $1839.  Even though the credit is applied toward other closing costs, you can look at it as offsetting the entire origination fee of $1800.