All Forum Posts by: Stephanie Medellin

@Jeff Daring  The first broker is correct.  Because you are living rent-free, have no housing payment, and no management history, and are buying this as an investment, you will not be able to count rental income to help you qualify, unfortunately.  You will have to qualify off your own income.  

Keep in mind a temporary buy down doesn't affect the DTI - the buyer will still need to qualify with the full interest rate. If they instead use the money towards points to permanently buy the rate down, that would help with DTI. The permanent buy downs will get you a less of a rate reduction, but long term.

In a refinance scenario, the points paid for a long-term (permanent) buy down would not be refunded, whereas if you're within the temporary buy-down period and rates drop, the buyers may be able to get a refund of any funds not used to lower their payments.

@Madden Telles FHA loans are only for purchasing a home to live in, so you wouldn't be able to use this type of loan to purchase an investment property, and you won't be able to buy it under an LLC. You could buy a 2-4 unit property and live in one of the units. If that's what you had in mind as an investment property, that could work.

You also won't be able to borrow your down payment.  It could be a gift from family, or money that you have saved.

I would suggest getting a part time job now, then transitioning to full time once you're done with school so you have work history to qualify for a loan.  Save as much money as you can from working to use for a down payment.  You'll also need to start building a credit history.  As mentioned above, you'll also need to be old enough to legally sign loan documents.

It's great you're learning all of this now, so you can work towards your goal!

Are you under contract right now, or just considering a purchase?  If you have physical cash saved, it needs to be deposited in your bank account, and it must sit in your account through at least two full account statements.  This is considered "seasoned."  If you don't have two months or more to wait, then it sounds like your lender is asking your family to give you gift funds for your down payment or closing costs so the funds can be documented.

Yes, funds coming from your wife will be considered a gift if she is not a borrower on the new rental loan.  Unfortunately, conventional financing (Fannie/Freddie) does not allow gift funds to be used when purchasing investment properties, even if the funds are from your spouse.  

Will the proceeds be deposited in a joint bank account?

Some other investment loan programs allow gift funds, so there are options out there besides conventional financing. 

When you refinance, the lender will order an appraisal to determine the property value. Every loan program sets a maximum percentage of that value that someone can borrow. For example, if you have 700k in a property, and you can borrow a maximum of 70% LTV (loan-to-value), the property will need to appraise for $1 million for the loan to be approved.

If the property doesn't appraise that high, you will have to lower your loan amount and won't be able to get back all of the cash that you invested.  If you owe the full 700k, you may need to bring money to closing to pay down that balance.

You would also need to financially qualify to cover that new monthly payment.   

Yes, you can pay the additional amount to bring your loan amount to the maximum county loan limit.

That's correct - your DTI will include the new mortgage payment that you're applying for. The lender has to make sure you can afford the new home along with your existing monthly payments. FHA loans are for primary residences only, and you'll need to certify that you intend to live there for at least a year. Rental income won't be a consideration right now unless it's a 2 to 4 unit property.

If you turn it into a rental at some point in the future and buy a new primary residence, you should be able to use a portion of the rental income to help qualify for a new home at that point.  Of course, this depends on loan guidelines at that time, the type of loan you use, and your finances in the future.

I have 2 options for investment HELOCs on California properties.  If your property is in another state, a mortgage broker in your state is likely to have some options for you.

@William C.  

For rentals not yet showing on your tax returns (like your Nevada property), many lenders will use 75% of the monthly rent to offset your PITI. You may need to show receipt of a few months rent along with the lease. If it's a very new lease, you'd provide copies of the security deposit and first month's rent with proof of deposit.

For rental income reported on your schedule E, a different calculation will be used.

Your current primary residence can also be converted to a rental.  You will need a signed lease and first month's rent and security deposit, but you should be able to use 75% of the monthly rent.  

While some lenders could have stricter guidelines when it comes to length of rental income history, these are the standard conventional guidelines that most lenders follow.