All Forum Posts by: Dana Anghel

Thank you for the replies (and the great link)!

Considering a high number of houses in Utah have unfinished basements, would that be a safe bet in significantly increasing a property's re-sale value?

I can finally originate Fannie Mae HomeStyle Renovation Loans, and I'm really excited!

But.

From my understanding at this point, there is one major thing that can be a deal breaker: if the appraiser concludes that the contractor bid will cost more then the actual value that would be added to the property. 

So my question for rehabbers/appraisers/general contractors out there: which home improvements are more likely to cost less then the actual after-renovation value? (ex: Tearing down walls to create more space, adding an extra bathroom..?)

Also, what are the worse renovations that don't add as much value in proportion to the actual cost? (pretty sure pools are right in that category).

Keep in mind that the work needs to be performed by a licensed and insured General Contractor - self help is not allowed.

Thank you for any input. [edited]

@Josh C. - you can get an FHA loan with 3.5% down for properties with 1-4 units (FHA does not insure properties with more that 4 units).

As for cash-out on investment properties, you can only go as high as 75% LTV if it is a one unit, and 70% LTV if we're talking about 2-4 units. Private portfolio lenders might be able to offer something different, but these are the standards set by Fannie Mae and Freddie Mac, and followed by any lender that will sell their loans on the secondary market.

Your issue seems to be that you haven't owned the properties for long. I believe at least 6 months have to pass since the purchase date before you can use a new appraisal value - until then, lenders will use the purchase price to base their LTV calculations.

Some of them will even require a year to pass, or ask to see proof of improvements you've made to the property in order to justify the higher value.

Hope this helps.

Not owning a primary residence is not a problem. Banks look at investment properties as being a higher risk, so they require you to have more "skin in the game" (meaning equity).

Depending on the number of units of the property, and the type of transaction ("rate and term" or "cash-out"), you will need to prove that you have anywhere from 15-30% equity. You also need to have at least 6 months of reserves (meaning funds to pay the mortgage) and good income.

Another issue that you might have is that some bank won't pay of "hard money loans", like the one you got from your uncle.

When looking for a lender, make sure all the requirements are met: equity, income, reserves and hard money loan financing.

Hopefully you've owned this home for at least 6 months.. it can make a difference if you haven't owned it for long, but are trying to do a cash-out.

You can do a VA cash-out refinance on your primary residence. Most lenders will allow it up to 90%, and a few will even do 100%. Make sure that the lender you chose will have no problem giving you "cash on hand" - you should be free to do as you like with that money (pay off the home equity, and use it to purchase a second home).

The VA will not finance a second home - government loans are designed for primary residences. However, if you have a VA home that used to be your primary residence, and is now a second home or investment property, you would be able to do an IRRRL (refinance) to lower your interest rate (no cash-out, no appraisal, no income documentation). Doesn't sound like your situation, but FYI.

Might as well address this also: contrary to what people believe, you can have more than one VA loan at a time (as long as you have enough entitlement available). This is because active military personnel is sometimes relocated, and it wouldn't be fair to force them into selling their home (since they might come back to it).

I'm not sure if the lender will be asking you why you want such a significant amount of cash-out (sometimes they do), but I would sit down with your loan officer and prepare the best response. There is probably nothing wrong with the truth - wanting to buy a second home - but make sure it is not interpreted as getting a VA loan on a home that you don't plan on living in. The VA home MUST be your primary residence.

Good luck!

If the home that was foreclosed wasn't an FHA loan, she needs to find out from the county records exactly when the deed was taken from her name and put in the bank's name. That will be the date the waiting period begins - it will be 3 years since foreclosure for FHA, VA or USDA.

The government mortgage reduction program sounds like HAMP.

[url] http://www.makinghomeaffordable.gov/programs/lower-payments/Pages/hamp.aspx [/url]

Who gave the "great advice" to go delinquent?

A lot of banks practiced this, telling borrowers that they won't help until they are delinquent, because otherwise it means they can still afford to pay. Once the borrowers went delinquent, they will get a loan modification (usually with an expiration date), and no other lender would touch them because of this modification - a whole other world of problems.

Don't forget the equity issue.. Because it is a 4 unit, the downpayment requirements on conventional (even for a primary residence) go from 5% (1 unit) to 20% (2 units) to 25% (3-4 units).

You can't refinance out of FHA to conventional without having the equity, and you can't get another FHA unless (again) you show equity. This is to prevent people from using FHA (too much) to purchase properties that turn into investment properties.

Like Brianna said, you need 2 years or tax returns showing rental income before you can use that income to help you qualify for a new purchase (I imagine it will come in handy). That's also 2 years you need to focus on creating enough equity to allow you to refinance ..

@Ed Wood What I meant to say was that the other loan originator's compensation was a point higher than what my company was charging. So I was more competitive with any of my lenders than the other LO with Provident.

I was just making a point that a lender's pricing is only as good as the lender compensation is charged - even the best rate sheet benefit can be offset by a high lender paid compensation.

@Tomasz Strzemecki most loans (except government loans like FHA, VA and USDA) are sold to either Fannie Mae or Freddie Mac (which is the secondary market). This frees up lender money so that they can keep lending. You can check the status of your current loans by using these loan lookup tools:

[url] https://knowyouroptions.com/loanlookup [/url]

[url] https://ww3.freddiemac.com/corporate [/url]

Bank of America for example is big enough and has enough funds to keep their own loan portfolio - and a lot of times they will chose to do so. They also service their loan (collect payments), so that's extra money. They still personally own a lot of the funky loans from before the market crash, such as stated income loans, as Fannie Mae and Freddie Mac will not purchase them.

Like Ed said, if you're providing full loan documentation and a solid downpayment.. your loan most likely fits Fannie Mae/Freddie Mac standards, and will eventually get sold to them.

Last time I saw Provident's rate sheet, the difference was almost half a point better than my best lender ($4,000 on an $800,000 loan).

But the mortgage company that the LO worked for also charged 1 point more in origination( lender paid compensation). So the savings were really going into a different pocket.

But I agree - high loan amount, great credit borrower, and decent lender paid compensation - they can make for a great deal, there is no doubt about it. Especially if every loan officer would go the extra mile to make that submission perfect ;)

In my opinion, the pricing difference is not worth the headache. To push a loan that is less than perfect (and most of them are) to a lender like that is just asking for trouble.

I worked with a similar lender, and while I was happy to get better pricing for my borrowers, I got tired of submitting letters of explanation for every little thing. Imagine an underwriter suggesting that the borrower sell his motor home in which he was living in until his construction loan was finalized! We were doing a VA loan, and the underwriter needed to be sure that the home was going to be the primary residence..

One of my colleagues just closed a purchase in 7 days, after the borrower had issue after issue with Provident (different mortgage company) and was close to missing his deadline.

I prefer being able to obtain exceptions on a case by case basis, rather than having to fit everything into a little box.