All Forum Posts by: Zach Wain

@Austin Barry - I love the approach of buying 1 new primary home each year and putting down 3%-5%.  Mortgage occupancy rules only require you to live in the home for 1 year, after that you can convert it to a rental property.  Buying as a primary home means less money down (3%-5% down vs 15%-25% down for a rental) and better interest rates.  Best of both worlds.

Downsides - you need to move a lot.  This is a great way to get started.  Get to a few homes and then re evaluate your approach and goals.

"Also some people tell me to "time the market" and to wait a little to start, while others tell me to just get in the game while I can. What do you all think?"

Most experts struggle to "time the market".  Most of the successful investors use more a dollar cost average approach.  Consistently add to your RE portfolio over time and in the end it will work out.

For a first time buyer, (IMO) its more about affordability then it is timing the market.  Find a home you like, one that will be a good rental in the future, and if its affordable (via house hacking) press forward.  Save up some more money, and do it again, and again.  Slow and steady/consistent wins the race!

Hi Xavier, My company is licensed in FL, feel free to reach anytime for info.

Unless there are massive property taxes in the "other costs" section of the loan estimate, it has to be the VA Funding Fee. I can not imagine how the costs get that high unless its one of the those two culprits.

@ari - sure thing.  Raised rates, I have not seen that from my lenders.  That type of presumption about the future can get a little dicey, I am surprised anyone wants to assume what rents will be in 1 year.

For the LLC item, here is the quote from the Fannie Mae selling guide "A transfer of the property (or, if the borrower is an inter vivos revocable trust, a transfer of a beneficial interest in the trust) to a limited liability company (LLC), provided that

• the mortgage loan was purchased or securitized by Fannie Mae on or after June 1, 2016, and
• the LLC is controlled by the original borrower or the original borrower owns a majority interest in the LLC, and if the transfer results in a permitted change of occupancy type to an investment property, such change does not violate the security instrument (for example, the 12 month occupancy requirement for a principal residence)."

Raymond is 100% correct on this. DTI impacts PMI, LTV of course, even borrower count 1 vs 2 makes a difference.

@Joe B. - Correct, not really, and here is some advice

First, Vacation/second homes can put down as little as 10% down instead of a min 15% for rental properties when doing a conventional loan.  Less down - correct.  Better rate - nope.  Over a year ago, Conventional loans made the rates for vacation homes and rental homes the exact same.  Previous to that, yes, vacation homes had the same rates are primary homes!  It was great, until everyone took advantage of it.

Some advice on renting it out.  If you are doing a short term rental, you can get away with vacation home occupancy if you occupy the home for some portion of the year.  This is the actual guideline from FNMA "must be occupied by the borrower for some portion of the year".  What is some portion?  NO IDEA!  There is no actual day count.  So, go use your short term rental for personal/family use during the first year and then you are good to go.

Another advantage of second homes besides rates vs rentals.  You can get an appraisal waiver with 20% down.  That can help a ton with your negotiations.

Hi Yash,

Our office is in Scottsdale and we just added a investor HELOC. Happy to run through the numbers with you.

Just a higher interest rate.  If rates drop in 1-2 years and you have a 3 yr PPP you not like the terms anymore...

@Ari Steinman - if you are asking lenders for interest rates be sure to ask interest and discount points, because interest rate is 1/2 of the equation.  If I can get a 6% 30 yr fixed on a rental, that sounds great, until I tell you its $30,000 in discount points to buy the rate.  Rate + discount points!

Any conventional loan in America is not allowed to close in a LLC. You must either close in your name or in the name of your trust. But, you can move title to your LLC immediately after closing. Fannie Mae is fine with this as long as you are the majority member of the LLC.

What downpayment are you looking at?  If you want the best deal, rental properties with 25%-30% down are getting better financing terms than 15%-20% options. 

Only DSCR loans will have PPP (prepayment penalties) and they range from 0-5 years depending on the lender and what you want. You can take a higher interest rate and select a 1 yr PPP for example. Or, maybe you want a lower rate and you are ok with a 3-4 yr PPP (which is too long IMO).

I am not sure what you mean by "supplement" to the loan after you raise rents.  Can you explain?