All Forum Posts by: Stephanie Medellin

Do you absolutely need cash out?  You can potentially qualify for a regular rate & term refinance of the 91k loan (plus closing costs) within 12 months.  

You could also start your transaction ahead of the 12 month mark and plan to close right at the end of the 12 months for a cash out refinance.  You don't have to wait for 12 months to pass to apply for the new loan.  You just can't close before 12 months is up.  You can talk to your new lender to plan your closing around this timeline.

I see a lot of posts mentioning DSCR loans, but if you're buying a primary residence, a DSCR loan cannot be used. DSCR loans are for investment properties only.

For traditional conventional financing, you won't be able to document short term rental income with AirBNB or VRBO reports.  While you could be granted an exception to use a 12-month lease if the property was acquired mid-year, it doesn't sound like you have an annual lease if you rent on a shorter term basis.  

Some lenders will average out a partial year of rental income from your tax returns if you cannot provide a lease.  It will be averaged over 12 months, which will help offset some of the expenses, and may or may not be enough to qualify for another property.  This will depend on the rest of your financial picture.  

Non-QM loans may be an option for you to qualify with short term rental income.  

Conventional loans to purchase (1-4 unit) investment properties don't require a personal financial statement.  The loan application will ask about the assets you need for the purchase (down payment, closing costs, and reserves), and you will need documentation for those accounts (most recent statements).  Your credit report will show your payment history and outstanding liabilities.

Commercial loans may ask for a personal financial statement.  

What specifically are you looking for in a "house hacking" loan? Most lenders have loan options available under 10% down for purchasing a primary residence - these are standard conventional and FHA programs. You can live in one room and rent out the other bedrooms to roommates in your house, but in most cases you won't be able to use that "boarder income" to qualify. That just means you need to qualify with your own personal income.

Thank you so much for posting this.  So many are under the impression that because a loan doesn't report on your credit, it doesn't count or doesn't have to be disclosed on a new loan application.  

Quote from @John Currey:

I recently talked with a mortgage broker and me and my wife didn't qualify for a loan on  an investment property. I'm honestly surprised, right now our only debt payment is a 857 mortgage, no car payment no student loans no credit card debt, and good credit 740's. she doesn't make just a lot (41k a year) but with the 857 mortage payment, her debt to income shouldn't be much over 25%. Would we not qualify for a 55k loan? 

With the very basic info provided, it sounds like your wife has a chance to qualify for a conventional investment property loan.  This is not considered a commercial loan.  I think you will find more conventional lenders that will offer smaller loan amounts than DSCR lenders.  DSCR lenders usually have minimums of at least 75k.  If the loan amount is the issue, can you find a higher priced property?  If she doesn't qualify with that particular lender, they should be explaining WHY.  The why will help you adjust course so that you can learn what you need to do to qualify - either for a different property, or in the future.  If the reason is particular to that lender, you can search for a lender that may not have the same restrictions.

Typically you'll have an occupancy clause in your loan documents stating you must occupy the property as your primary residence within 60 days of signing your closing documents, and must continue to live there for at least one year. Verbiage could vary from state to state, or lender to lender, or by loan type, so you can always check with your lender if you're concerned.

What type of loan do they have?

Depending on property condition and whether the property is still habitable (renovations are primarily cosmetic), you shouldn't rule out a regular cash out refinance, which may be cheaper than a renovation loan or other non-conventional product.  You won't need to refinance when the project is complete because you'll already have a long term loan in place.

Talk to a mortgage broker about the condition of the property.  They can give you an educated assessment of whether they think there will be appraisal issues. 

Quote from @Ron S.:

you have no duty to move forward unless you sing loan docs and in the case of a refinance, not even then for the first three days after. If they spent money on credit, title, etc., its all a part of doing business. That doesn't mean they won't send you a bill but, they can't make you go through with a loan.

 The right of rescission only applies to owner-occupied property refinances - not investment properties!