All Forum Posts by: Zack Karp

@Christopher Morris so here's how this works. If you refinance it as your primary residence, then yes, you will be signing a new Mortgage at closing that says you intend to occupy for 12 months, essentially resetting your clock to another 12 months.

But here's the huge kicker. You can do a FHA streamline refi on an investment property, and the rate is the same as a primary. So, wait until you buy another primary residence first using the 5% down Conventional, and THEN do the streamline refi on your existing property as an investment property. Same rules, same guidelines, same rate, just no occupancy requirement.

Working with the right loan officer makes all the difference...

Best of luck!

@Teekap Pate yes this is common, and necessary in order to use rental income for qualifying. A rent schedule is a supplement to an appraisal, and usually costs $100-$150 in addition to the standard appraisal fee.

@Brandon Burch it's funny how people don't actually answer the question you were asking...

The answer is no, refinancing will not negatively affect your ability to sell, refinance, get a heloc, or anything in the future. At least with a Conventional loan, where there will not be any prepayment penalty, or any issue with having a 2nd lien behind it.

Strategically, if you are going to keep this property and want to get a heloc, then ideally you should refinance BEFORE getting the heloc. This is because once there is a 2nd lien heloc, they will need to subordinate to a refinance of the 1st lien, and sometimes that can be a messy experience, depending on the heloc lender and their guidelines.

Obviously the cost of refinancing matters too. Investment property Conventional rates are NOT 6% at par right now (no points). So to save 1% from your 7% rate with a Conventional loan, there will be some hefty cost, and it's not worth it right now, and there's no crystal ball as to when a refi might make sense financially.

However, if your current loan is FHA, FHA does allow a streamline refinance as an investment property, and the rate will be based on a primary residence rate. So you could get a 1% lower rate, but only to another FHA loan, which will also still have MIP (PMI). And you won't be able to buy another property with FHA. If that's not what your desired outcome is, do not get suckered into doing the FHA streamline refi.

So at the end of the day, you have options, but if your goal is to buy another property, it's best to walk through all your options with a loan officer who specializes in working with investors and these exact scenarios, and map out a gameplan not only for your current property and next property, but getting to property 3,4,5 etc so that you don't get stuck on your journey.

Hope that helps and best of luck!

@Edward Jung the VA loan requires 6 months of PITI reserves for the purchase a 2-4 unit property. So if your mortgage payment will be $4,000/mo, then yes you would need $24K in remaining verified assets (after closing funds, if any) to satisfy the reserve requirement. Future rental income is not able to be used.

Keep in mind that retirement assets (401K, IRA, etc) are eligible towards reserves, and so are any other investment accounts.

Rental income is only used towards the income portion of qualifying, not towards assets.

Hope that helps. TYFYS and best of luck!

@Paul De Luca thanks for tagging me in

@Veronica Mitchell did you get this sorted yet? If not, feel free to reach out. Some lenders are more conservative than others when it comes to contract employees. FHA does not have a clear definition in their guidelines, but most lenders have stability standards, depending on several factors (contract length, previous employment, etc). Happy to look into it if you still need help.

@Nicholas Halterman to answer your question, is it worth putting money down on a VA loan, the short answer is...it depends.

The answer differs whether or not you are just buying 1 home, or planning to house hack. And it also depends on whether you are disabled or not.

If you are just buying a home to live in and not invest, then I believe it's best to put at least 5% down if you can, since you won't need to save money for future down payments.

As a general rule, as an investor, cash is king. The less you can put down on any property, means more capital for future down payments.

For a VA loan, if you are not disabled, there is a funding fee that the VA charges. Now this gets financed into the loan, you don't need to pay it out of pocket. But it's still a real cost. The funding fee on your first property with 0 down is 2.15% of the loan amount. If you put 5% down, this lowers to 1.5%. Not a huge difference, but again money is money. But on any subsequent properties using your VA loan, with 0 down it's 3.3%, and with 5% down it's still only 1.5%.

Wait what, you can you use your VA loan more than once? Yes! More on that in a minute.

Because it's only a 0.65% difference on your first property, IMO it makes sense to put 0 down. But on your next property, you can certainly make the case that by putting 5% down you are saving 1.8% in cost.

The interest rate is the same either way, whether you put 0 down or 5% down.

And I am a HUGE fan of getting seller credit to cover your closing costs, that is something you would include in your offer(s). With a max seller credit, you can actually get money back at closing. The right loan officer can calculate all of this for you and set you up for success not only now but for future properties too.

And as I mentioned, you can not only use your VA benefit for 1 property, if your purchase price is low enough, you will have secondary/bonus entitlement to buy a second property with a VA loan. Again, getting with the right loan officer can help you plan these numbers so that you don't have surprises later.

Now, using the VA loan twice isn't as important anymore, now that you can do 5% down with a Conventional loan for a 2-4 unit. But if you want to buy 2 properties with 0 down, and save your money for property #3 and after, then that part is critical to make sure you don't overspend on property #1 and not be able to use your VA entitlement for property #2.

Hope that helps! TYFYS and best of luck!

Congrats @Tyler Henkel! The first step to building your REI empire. Thanks for trusting me to be a part of Team Tyler!

@Dan Gongora hey Dan hope all is well! One of my clients said they got one at Signature federal credit union. Can't speak to their terms, but can confirm they do 2nd lien helocs on investment properties.

@Borys Pawlowski welcome to BP! I'm in Gilberts and I work with a lot of local investors in Chicagoland, both with getting started/house hacking, and also building up to their first 10 properties creating their REI empire. Hit me up if you ever need any financing help for your buyers.

@Samantha Elliott as a lender I will tell you DO NOT REFINANCE THAT 2.875 RATE! Get a heloc. Yes the 8-10% rate on the heloc is hard to swallow, but it's your best option if you don't have the funds for down payment on the new home. For the new home, you only need 5% down, so the heloc payment really won't be that much (I.E. $20K at 10% is only $166/mo). It's truly the best option for your scenario for the best long term outcome, and the other options aren't close.

Best of luck!