All Forum Posts by: Weng L.

Originally posted by @Chris Mason:

I have not heard of them. I went to their website, and looked up their license on the gov't website for that.

I'm generally wary of companies doing business as 50 different trade names. 

Hi @Chris Mason

Why a lender using multiple domain names is a red flag?

I talk to Angel Oak lately and they also have several domain names

https://angeloakcapital.com/

https://angeloakhomeloans.com/

https://angeloakms.com/

Right now interest rate is 1% less than pre-covid. What if interest rate goes back to pre-covid level (1% more), what do you guys think is going to happen?

If getting a mortgage of $500K, 1% interest rate hike will have to pay $5000/yr more in interest, that is $400/mo. When you borrow $100K 30-year mortgage today, monthly payment is $400 (principal and interest). So you have to reduce purchase price by $100K to make monthly payment the same as before if rate goes up by 1% (These are all rough numbers). Wouldn't this make a huge impact on price?

I have seen several times that lenders calculate DTI incorrectly.

For example, if total expense of your rental properties is $9,000/mo and total gross rent is $10,000/mo (thus net rental income is $1,000/mo); You have a employment job that pays you $8,000/mo salary and you primary home's PTITA is $900, no other debts

The correct way to calculate DTI is 900 / (8000 + 1000) = 10%

I have seen several lenders calculate like this  (900 + 9000) / (8000 + 10000) = 55%

https://selling-guide.fanniema...

If the rental income (or loss) relates to a property other than the borrower's principal residence:

• If the monthly qualifying rental income (as defined above) minus the full PITIA is positive, it must be added to the borrower’s total monthly income.
• If the monthly qualifying rental income minus PITIA is negative, the monthly net rental loss must be added to the borrower’s total monthly obligations.
• The full PITIA for the rental property is factored into the amount of the net rental income (or loss); therefore, it should not be counted as a monthly obligation.
• The full monthly payment for the borrower's principal residence (full PITIA or monthly rent) must be counted as a monthly obligation.

So, only the net rental profit or loss should count towards your DTI, not the entire PITIA and repair cost.

If you have a net rent loss of 1000/mo instead of net rent profit, then DTI is (900+1000) / 8000 = 23.75%

In summary 

If it's positive rental income, DTI = Primary home PITIA / (Salary + Net rental income);

If it's rental loss, then DTI = (Primary home PITIA + Rental loss) / Salary.

I didn't calculate exact numbers, but on top of my mind insurance premium across all my properties went up by 55%-60% in past 5 years.

The insurance system is the U.S is broken. I've discussed this with people from different countries. I don't know how many countries in the world have or don't have home insurance respectively, I know countries that do not have home insurance are just fine, government will pay for rebuild after nature disaster. It is totally a waste of labor resource to have so many insurance companies to insure something that has very small chance to happen. Banks in non-home-insurance countries issue mortgages because they are never aware of there is such a thing called home insurance. If a property is totaled, bank and home owner eat the loss. If a country really needs home insurance, insurance provider should be non-profit and should cover nature disaster only. When you see Lemonade went public and stock price skyrocketing, you know something is wrong.

I worked for a home insurance company for 4.5 years and heard that over 90% claims in Florida are water damage, and lots of unnecessary huge pay out (such as because  one tile needs to be broken to stop water leak in slab, insurance needs to pay all tiles of whole house to avoid title mismatch. What a stupid law! A house is still livable even if a tile looks slightly different than others) and frauds (people left tub faucet water running and claimed that they forgot to shut it off before went out for shopping. People went to attic to burn one of roof tiles and claimed roof was hit by lighting. The tile looked black and smoked on the bottom but 100% fine on top, and insurance paid for the roof because it cost more to go to court). 

It couldn't stop laughing me when I saw the company I worked for add new coverages - ID theft coverage, computer coverage, golf cart, etc for a few dollars more on each coverage. They spend unnecessary labor and time to make coverage more and more complicated just to make a few more dollars of profit.

I am buying a new construction at flood zone AH. I learned that if the property meets certain criteria, you can request FEMA to remove it from high risk flood zone. But I can't find what criteria needs to be met in order to have FEMA change its flood zone. Any one done it before?

https://www.fema.gov/flood-map... 

The property has a Base Flood Elevation 7 ft (item B9 in Elevation Certificate). The measurement numbers provided by surveyor are shown in attached photo 

I have heard different information from different builders. One said that as long as Top of bottom floor is above FEMA requirement 8 ft, flood insurance is not required by lender automatically even if the property is in FEMA high risk flood zone. I doubt it is as simple as that

These 2 links are Fannie Mae and Freddie Mac's what count or do not count towards 10 financed properties

https://selling-guide.fanniema...
https://guide.freddiemac.com/a...

This is a random lender's underwriting guideline I found online. Page #7 is their interpretation on what count and what don't count

https://wholesale.lhfs.com/dow...

@Ben Durwood Thank you for sharing your hand-on experience. If you get a portfolio loan in an LLC, is this rental property reported on Schedule E of your tax return like other rental properties under your personal name? If so, it is going to be difficult for a lender to ignore it even if the loan is not on your credit report.

Hi all

I searched in BP and found lots of posts talking about how to get new mortgages after you hit 10+ financed properties. However my question is a little different - After hitting 10th conventional financed property, how to buy 11st+ properties so that if you sell one of the first 10 conventional financed property in the future, you can still get one more property with conventional loan?

Not sure if the question is clear enough. If not, here is an example - let's say if you bought properties #11 to #15 using portfolio loans under your name or LLC (own more than 75% of the LLC), and in the future you sell one of your properties that has conventional loan, you still cannot buy another property with conventional loan because you have 14 financed properties. I read that property financed under corporate or s-corp does not count towards the 10 spots, is this correct? (Is corporate the same as c-corp?)

So is using corporate or s-corp the way to go (the answer to my own question?)? Is it mandatory that the 11st+ mortgages have to be not shown on your credit report? 

Another question is that is it ok to create a new corporate or s-corp each time right before each purchase (like the way we use LLC) for the purpose of risk separation? (If lender uses rental income of subject property as qualification rather than personal income)

Majority of fourplexes in my metro area are 4/4, 5/4 or at most 8/4 and are very small (half size) and old (1950s and 1960s).

The subject property is four 3/2.5 2-story townhouses so it is 12/10 total, new construction. I personally found 2 possible comparables but whether they are qualified for comparables or not is very questionable 

1) a 12-unit family 1/1 each, 12/12 total, similar size, in the same city but built on 1970 (there are several such 10 to 12-unit properties in adjacent cities)

2) four 3/3 2-story townhouses, 12/12 total, similar size, new construction sold on 2020, but in a different city (much closer to beach),  10-15 miles away from subject property

Yea I thought it should be qualified for a fourplex too. But after talking to me loan agent, I have to buy these 4 townhouses separately because it is hard to find similar comparables during appraisal and if so it will not be able to get a loan if appraisal report indicates "unable to determine value due to lack of comparables"