All Forum Posts by: Zack Karp

@Jonathan Klemm thanks for the tag!

@Alvin C. welcome to BP! Let me know if you have any questions in regards to financing the house hack. Depending on how many properties you want to buy, the type of properties, and the capital you have to work with, there are several different strategies to use, and the order of how you finance them could make or break a successful run at several house hacks, or getting stuck with one and done. Make sure you are working with an experienced loan officer that can help you map it all out and navigate your journey with you.

Best of luck!

@Charles Granja it's actually the opposite. The VA underwriting guidelines are generally looser than Conventional and FHA.

And the lender you are talking to, who supposedly spoke to the VA, is dead wrong. Or they have overlays.

You can ABSOLUTELY use rental income from the house you are vacating without 2 years tax returns, because the VA guidelines allow you to offset the PITI with prospective rental income. You cannot use any surplus rental income over the PITI added to your qualifying income, but the amount of rental income up to the PITI can be used to wash it to $0.

The paid off house you can also use the rental income on the most recent tax return, as long as you have a 2 year history with other properties. Now, it will be prorated and may not show the full rental income, but it will be something.

The other thing to be aware of is that you will need a hefty amount of reserves. You will need 3 months PITI reserves for each of your properties. In addition to 6 months reserves on the subject property you are buying.

Now, if you are assuming a mortgage, then unfortunately you have to deal with that lender and their guidelines, which could be overlays to the actual VA guidelines. Either that, or they aren't trying hard enough to make it work.

If you are buying with a regular sale and not an assumption, be sure to work with someone who actually knows what you can and cannot do with VA lending, and is helping you to maximize your buying power.

TYFYS and best of luck!

@Chris Roberts yikes these responses are all over the place.

I assume your question is for Conventional financing. It depends on your LTV, credit score, and reserves. These are the predominant factors for automated underwriting for DU and LP (Fannie and Freddie). Fannie will allow up to 50.00% DTI, while Freddie will allow up to 50.49%. This can be front end only if you have no other debt. It's more likely to get a 50% front end when you are putting 20%+ down and/or have a high credit score, but possible even with as little as 5% down. The loan officer would need to run AU to see what you qualify for.

So to answer your question, yes 50% front end is possible. Best of luck!

@Abraham Kaplan a VA loan is a VA loan. No lender (bank or otherwise) can exceed the VA guidelines. HOWEVER, any bank or lender can impose overlays, which are more restrictive guidelines than the actual VA guidelines.

Here's an example. Let's say you want to buy a 2-4 unit, you have no previous landlord experience, and you want/need to use the rental income from the other unit(s) for qualifying. The VA allows you to hire a property manager and that counts for your landlord experience, and that allows you to use the rental income and therefore afford a much higher price point. However, Bank ABC says nope, we don't allow that.

That's an overlay.

There are many, many situations where lenders impose overlays, and unfortunately YOU the consumer has no idea until you are already working with that lender if one comes up. For example, you might get preapproved by a lender saying that your max purchase price is XXX. But they might have an overlay that caps your debt-to-income ratio at a certain number, where a direct lender does not for VA, allowing you to buy at a much higher price point and DTI. And then you might take that loan officer's word, thinking that all lenders will only approve you for XXX, and miss out on a better opportunity.

Big Banks are the most notorious for having overlays, but any large bank, small bank, local bank, credit union, broker, etc can have them. The only way to avoid them is to work with a lender that underwrites directly to the VA guidelines, and does not have their own internal guidelines and overlays.

Hope that makes sense!

@Abraham Kaplan if you have full entitlement, there is no max loan amount.  You could buy a $4M 4-unit with zero down if you wanted (as long as you can qualify).

The type of lender can matter. Big banks and credit unions could have overlays on top of the actual VA guidelines. Larger mortgage companies like Rocket you're working with a call center and you're just a number to them, you won't get the same type of service and knowledge as working with an experienced loan officer that specializes in VA and with investors. This part especially matters when using rental income for qualifying and/or other nuances that can make or break your investing journey. Just my 2 cents...

TYFYS and best of luck!

@Rayjunior Nunez it depends what types of pay you receive. Are you salaried or hourly? Do you receive any overtime, commission, or bonus? All of these factors play into your qualifying income.

For example, if you just receive a base salary, then you don't even need a 2 year history, that can be used right away.

However, depending on the type of loan, any variable income, overtime, commission, and/or bonus have different requirements and seasoning in order to be used as qualifying income.

I'd be happy to discuss your specific situation if you want to reach out.

@Tyler D. it comes down to what you want. Do you want to live in a killer home? Or make money?

If you buy a 2-4 unit, you are required to live in one of the units for at least 1 year, and then you can move out and convert it to a full rental. The other unit(s) you can rent out year-round. Not sure where you got the 6 months from, that's not a thing.

I help a ton of Veterans use their VA benefit to house hack 2-4 units in Chicago. Just closed one for $1.4M last week for a Veteran. If you need any help or have any questions, just let me know.

TYFYS and best of luck!

HOWEVER (assuming this is a condo), if you are putting at least 10% down as a primary residence, then it qualifies as a LIMITED condo review, not a full review.  And in a limited review condo questionnaire, there is not a requirement to ask for the investor concentration.

The buyer that went pending was probably putting less than 10% down. And now the listing agent and seller don't know any better, and think they only can get a cash buyer to qualify.

@Scarlett Schroeder yes you can absolutely get a heloc from a different bank on your primary, as long as there is nothing in your current Mortgage/Note prohibiting a 2nd lien behind their 1st lien. Stay away from the big banks for the heloc, they don't offer as high of an LTV as a smaller bank or credit union will.

Best of luck!

@Gabriel Barrero if you refinance to a Conventional investment property loan, which pays off the current loan (and means you're no longer bound to that Mortgage of occupying for 1 year), then you can do that at any time and move out and rent it out.  If you don't, and you move out before 1 year and rent it out (unless you got orders to transfer), then that's mortgage fraud.

TYFYS and best of luck!