All Forum Posts by: Zack Karp

Great info Derek!

welcome to BP!

@John McConnell

I am not an advocate for people quitting their W2 job prematurely.  Real estate investing is a marathon, not a sprint.  Everyone's situation is different, but yes you will limit your lending ability once you make the switch, especially in years 1-3.  Year 1, forget about it.  Year 2 is tricky, because if you are using rental income to qualify, you still need 2 years tax returns.  Even year 3 can be difficult, because if you were still ramping up in years 1 & 2, your income may still not show enough on your tax returns.  But again, everyone's situation is different.

Sounds like you have a great plan for your own personal success, best of luck to you!

Wanted to make sure what I wrote in my last post doesn't get lost and deserves it's own post, especially in this BP community.

Having to wait 6 months seasoning to do a cash out refi at the new value, is an OVERLAY.

Fannie allows for no seasoning on flips and refis, it's the lenders that impose the 6 month rule.  There are some lenders that are Fannie direct and do not have that overlay.  In the spirit of keeping this informative, I will say to ask around because many people have no idea that direct lending without overlays even exists, even within the industry.  And as mentioned in the original post, many loan officers have no idea that their own product line carries overlays.  They just think that everyone has the same guidelines, especially if they have not been in the industry long, or don't know anything outside their own company and training.

Did you know that you can buy a 1-unit investment property with conventional financing for 15% down at 85% LTV? Not the 20% down that most of us have been accustomed to. That one is also huge for this community.

There are so many overlays out there that most of the industry follows.  Being a direct lender opened my eyes and I hope that I can spread my knowledge with this great BP community and help as many of you as I can to understand that you may not be as limited as you think.

Yes for conventional financing you would still need either W-2 income, or 1 year tax return showing enough 1099 income to qualify, for both delayed financing or a cash out refi.  But you actually don't need to wait 6 months to do a cash out refi, that's an overlay.  I have helped investors do a cash out refi at the new appraised value as soon as the rehab is completed.  If your lender says you need to wait 6 months, there are other lenders that don't have that overlay.

Hi @Kate H.

Ah, one of the many pitfalls in our business.  Going from a W-2 to a 1099 position makes you self-employed in the lending world.  You would not be able to qualify for conventional financing if you are just switching, and make sure you have an exit strategy if you are buying cash so you don't get stuck because you can't refinance using delayed financing.

This is a great opportunity to discuss another overlay.  So I'm guessing that almost every conventional lender is telling you guys that you need to have 2 years tax returns once you become self-employed.  Freddie Mac actually approves loans with only 1 year of tax returns for self-employed borrowers, as long as you get AUS approval.  But most lenders still want 2 years tax returns, and that makes it an overlay.  I have approved and funded self-employed borrowers with just 1 year tax returns.  However, in order to use rental income, for that you still need 2 years tax returns.  So for most of us in the real estate investor world, it would not work with just the 1 year return.  But for those just starting out that don't have an investment property yet, you may be able to get in the game a year sooner than you thought.

@Eddie T.

While I would love to tell you the answer you are hoping to hear, I cannot give you any advice other than to follow the contract that you are signing, otherwise known as a mortgage, that states you cannot transfer title without the lender's written permission (except for several events allowable by law, see the Garn-St. Germain Act, which allows transfer to a land trust).  What you do from there is your own business.  Lenders can certainly find out, it's public record, and they also have deeper pockets than you.  And a disclaimer, consult with an attorney, as I cannot give any legal advice.

@Colin Smith

Typically a preapproval letter can be done within minutes.  Some companies and loan officers operate differently, but I can only speak from my own experience.  After pulling credit and getting all of the income, asset, and other pertinent information, I run automated underwriting, and if approved I email the preapproval letter to the buyer within minutes.  Time is money when you are making offers!

Thanks @Colin Smith!

Hi @Jon Klaus, thanks for the question.  Most lenders can close a purchase in 30 days, and I'm no exception.  Although many of the major banks run at longer turn times due to their volume, since their underwriting resources are not just their own retail, but also correspondent and wholesale from brokers.  If anyone tells you they can close a conventional loan in less than 30 days, especially 15-20 days, be careful they aren't just selling you to get your business, and surprise, you aren't closing on time.  The approval process can vary widely per lender, some submit to underwriting right away, and some wait for the appraisal and verifications to come back first and then submit.  It's always best to be upfront about your situation and ask questions.