Profile picture for Dan Currie

Dan Currie

Lender

Licensed Mortgage Loan Originator (29 years experience)

Specialties:
Investment Property Financing,
Purchase Loan,
Reverse Mortgage, Construction,
Home Improvement Financing

Advice

  • (131 Contributions,
  • 1 Best Answers,
  • 20 Helpful)

Contributions are sorted newest to oldest.

What is the best type of loan to use on investment property?

Answer

Thanks for clearing that up Bronch!I have submitted a request to Zillow to remove part of my answer from the Q&A, so others don't get incorrect information.regarding my recommendation that a self-directed IRA could be used to loan money to family members without specifying "the lineal heritage".It's important to understand that we all are trying to help, but we don't always have all the answers.

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can I get a second FHA loan to buy another home?

Answer

Here's an article with a HUD hanbook reference that I found on the internet:Can a person have more than one FHA loan?To prevent circumvention of the restrictions on FHA-insured mortgages to investors, FHA generally will not insure more than one mortgage for any borrower (transactions in which an existing FHA mortgage is paid off and another FHA mortgage is acquired are acceptable). Any person individually or jointly owning a home covered by a mortgage insured by FHA in which ownership is maintained may not purchase another principal residence with FHA mortgage insurance except under the situations described below. Properties previously acquired as investment properties are not subject to these restrictions.FHA will not insure a mortgage if FHA concludes that the transaction was designed to use FHA mortgage insurance as a vehicle for obtaining investment properties, even if the property to be encumbered will be the only one owned using FHA mortgage insurance.We do not object to homebuyers using FHA mortgage insurance more than once if compatible with the homebuyer's needs and resources as follows:A. Relocations. If the borrower is relocating and re-establishing residency in another area not within reasonable commuting distance from the current principal residence, the borrower may obtain another mortgage using FHA insured financing and is not required to sell the existing property covered by a FHA-insured mortgage. The relocation need not be employer mandated to qualify for this exception. Further, if the borrower returns to an area where he or she owns a property with an FHA-insured mortgage, it is not required that the borrower re-establish primary residency in that property in order to be eligible for another FHA insured mortgage.B. Increase in Family Size. The borrower may be permitted to obtain another home with an FHA-insured mortgage if the number of legal dependents increases to the point that the present house no longer meets the family's needs. The borrower must provide satisfactory evidence of the increase in dependents and the property's failure to meet the family's needs. The borrower also must pay down the outstanding FHA mortgage (secondary liens do not need to be paid off or paid down) on the present property to a 75 percent or lower loan-to-value (LTV) ratio. A current residential appraisal must be used to determine LTV compliance. Tax assessments, market analyses by real estate brokers, etc., are not acceptable as proof of LTV compliance.C. Vacating a Jointly Owned Property. If the borrower is vacating a residence that will remain occupied by a co-borrower, the borrower is permitted to obtain another FHA-insured mortgage. Acceptable situations include instances of divorce, after which the vacating ex-spouse will purchase a new home, or one of the co-borrowers will vacate the existing property.D. Non-Occupying Co-Borrower. A non-occupying co-borrower on property being purchased with an FHA-insured mortgage as a principal residence by other family members may have a joint interest in that property as well as in a principal residence of their own with a FHA-insured mortgage. (See HUD Handbook 4155.1 for additional information). Under no circumstances may investors use the exceptions described above to circumvent FHA's ban on loans to private investors and acquire rental properties through purportedly purchasing "principal residences".Considerations in determining the eligibility of a borrower for one of these exceptions are the length of time the previous property was owned by the borrower and the circumstances that compel the borrower to purchase another residence with an FHA-insured mortgage. In all other cases, the purchasing borrower either must pay off the FHA-insured mortgage on the previous residence or terminate ownership of that property before acquiring another FHA-insured mortgage.Handbook 4155.1: 4.B.2.c-dREFERENCEHandbook 4155.1: 4.B.2.c-dREFERRAL LOCATIONDISCLAIMERDISCLAIMER: All policy information contained in this knowledge base article is based upon the referenced HUD policy document. Any lending or insuring decisions should adhere to the specific information contained in that underlying policy document.

  (3)
can I get a second FHA loan to buy another home?

Answer

Here's an article with a HUD hanbook reference that I found on the internet:Can a person have more than one FHA loan?To prevent circumvention of the restrictions on FHA-insured mortgages to investors, FHA generally will not insure more than one mortgage for any borrower (transactions in which an existing FHA mortgage is paid off and another FHA mortgage is acquired are acceptable). Any person individually or jointly owning a home covered by a mortgage insured by FHA in which ownership is maintained may not purchase another principal residence with FHA mortgage insurance except under the situations described below. Properties previously acquired as investment properties are not subject to these restrictions.FHA will not insure a mortgage if FHA concludes that the transaction was designed to use FHA mortgage insurance as a vehicle for obtaining investment properties, even if the property to be encumbered will be the only one owned using FHA mortgage insurance.We do not object to homebuyers using FHA mortgage insurance more than once if compatible with the homebuyer's needs and resources as follows:A. Relocations. If the borrower is relocating and re-establishing residency in another area not within reasonable commuting distance from the current principal residence, the borrower may obtain another mortgage using FHA insured financing and is not required to sell the existing property covered by a FHA-insured mortgage. The relocation need not be employer mandated to qualify for this exception. Further, if the borrower returns to an area where he or she owns a property with an FHA-insured mortgage, it is not required that the borrower re-establish primary residency in that property in order to be eligible for another FHA insured mortgage.B. Increase in Family Size. The borrower may be permitted to obtain another home with an FHA-insured mortgage if the number of legal dependents increases to the point that the present house no longer meets the family's needs. The borrower must provide satisfactory evidence of the increase in dependents and the property's failure to meet the family's needs. The borrower also must pay down the outstanding FHA mortgage (secondary liens do not need to be paid off or paid down) on the present property to a 75 percent or lower loan-to-value (LTV) ratio. A current residential appraisal must be used to determine LTV compliance. Tax assessments, market analyses by real estate brokers, etc., are not acceptable as proof of LTV compliance.C. Vacating a Jointly Owned Property. If the borrower is vacating a residence that will remain occupied by a co-borrower, the borrower is permitted to obtain another FHA-insured mortgage. Acceptable situations include instances of divorce, after which the vacating ex-spouse will purchase a new home, or one of the co-borrowers will vacate the existing property.D. Non-Occupying Co-Borrower. A non-occupying co-borrower on property being purchased with an FHA-insured mortgage as a principal residence by other family members may have a joint interest in that property as well as in a principal residence of their own with a FHA-insured mortgage. (See HUD Handbook 4155.1 for additional information). Under no circumstances may investors use the exceptions described above to circumvent FHA's ban on loans to private investors and acquire rental properties through purportedly purchasing "principal residences".Considerations in determining the eligibility of a borrower for one of these exceptions are the length of time the previous property was owned by the borrower and the circumstances that compel the borrower to purchase another residence with an FHA-insured mortgage. In all other cases, the purchasing borrower either must pay off the FHA-insured mortgage on the previous residence or terminate ownership of that property before acquiring another FHA-insured mortgage.Handbook 4155.1: 4.B.2.c-dREFERENCEHandbook 4155.1: 4.B.2.c-dREFERRAL LOCATIONDISCLAIMERDISCLAIMER: All policy information contained in this knowledge base article is based upon the referenced HUD policy document. Any lending or insuring decisions should adhere to the specific information contained in that underlying policy document.

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Sell your home for full market value!

Ask your Realtor to advertise seller financing. Let's look at some cases where a buyer is a good risk to offer seller financing: 1.) Someone who just had their bankruptcy discharged. They can pay 10% down-payment. They just need to wait 2 years to qualify for an FHA loan. 2.) A divorcee can't qualify because they are jointly obligated on their ex-spouse's mortgage loan, until their ex-spouse can refinance or sell the home. Begin with a lease agreement and offer an option to buy taking a non-refundable consideration equal to 5%-10% of the price. Execute a land contract agreement but also have a quit claim deed notorized to record the if the buyer defaults. Let's say your home is listed for $200,000. typically, expect to get 95.5% of that price. You are offering 3% to help a buyer pay for settlement costs. $191,000 is 95.5% of the list price. $5730 is 3% of the sales price (seller concession). $13,370 is 7% of the price for Realtors. Title costs are $850 and other costs are $500. The net sales proceeds at closing are $170,550. Look at a sale financed by the seller: Price is $200,000 and down-payment is $10,000. The loan amount is $195,000 ($5000 was added similarily to up-front mortgage insurance). Let the buyer pay your PITI loan payments. You will be able to charge a contract fee of $275 monthly. In 18 months they pay you the $195,000 less the principal reduction of your loan. You sold your home for $200,000 initially plus $5000 and $275 for 18 months. Your total price is $209,950. Realtors get $14,000 at 7% of the $200,000. Your net price is $195,950; over $25,000 more than an out-right sale. You may not qualify for your new home purchase with two mortgage loan payments. You may not have $14,000 to pay out of pocket to Realtors. Make sure you secure someone to be your watch-dog if you can't be near.

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How much rental history does a lender need if I am renting out my house and looking to purchase?

Answer

cfraz9,Yes, 25% of the amount of rental income as shown on the lease agreement is carved out to account for "vacancy and maintenance". 75% of the rental income amount will be used in a calculation known as a "rent roll". Your total payment for the rental property loan which includes principal, interest and mortgage insurance plus monthly costs for property taxes and homeowners insurance will be subtracted from 75% of the monthly rental amount. The positive monthly income would be added or the negative monthly income would be subtracted from your other income before dividing all other monthly debt payments as a percentage of your gross monthly income.

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How much rental history does a lender need if I am renting out my house and looking to purchase?

Answer

cfraz9,Yes, 25% of the amount of rental income as shown on the lease agreement is carved out to account for "vacancy and maintenance". 75% of the rental income amount will be used in a calculation known as a "rent roll". Your total payment for the rental property loan which includes principal, interest and mortgage insurance plus monthly costs for property taxes and homeowners insurance will be subtracted from 75% of the monthly rental amount. The positive monthly income would be added or the negative monthly income would be subtracted from your other income before dividing all other monthly debt payments as a percentage of your gross monthly income.

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How much rental history does a lender need if I am renting out my house and looking to purchase?

Answer

Are you buying another rental property or a residence for yourself?If you buy rental property, you are limited to four financed properties under Freddie Mac guidelines. If you want to buy up to 10 properties (including your residence or second home), you need Fannie Mae guidelines and you will need a 2 year history of managing rental properties, a higher credit score, and 6 months reserves equal to PITI payments for each property.However, if you are buying a residence, you don't need 2 years rental history. If you have a written lease agreement for the past 12 months and it is good for the next 12 months, then the loan payment you pay on that home's loan will be offset by a factor of 75% of the rent less the PITI payment. You don't need to use the tax returns to qualify if you don't have a 2 year history.I don't understand Rosemarie's statement about having to show income on your W2; that is income reported by your employer. Maybe she means your 1040 and schedule of real estate income and expenses (schedule-E), as Jeff, Cheryl and Eric explained.Seek a lender by interviewing several and choose who you .like; ask for referrals from people you trust too!

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How much rental history does a lender need if I am renting out my house and looking to purchase?

Answer

Are you buying another rental property or a residence for yourself?If you buy rental property, you are limited to four financed properties under Freddie Mac guidelines. If you want to buy up to 10 properties (including your residence or second home), you need Fannie Mae guidelines and you will need a 2 year history of managing rental properties, a higher credit score, and 6 months reserves equal to PITI payments for each property.However, if you are buying a residence, you don't need 2 years rental history. If you have a written lease agreement for the past 12 months and it is good for the next 12 months, then the loan payment you pay on that home's loan will be offset by a factor of 75% of the rent less the PITI payment. You don't need to use the tax returns to qualify if you don't have a 2 year history.I don't understand Rosemarie's statement about having to show income on your W2; that is income reported by your employer. Maybe she means your 1040 and schedule of real estate income and expenses (schedule-E), as Jeff, Cheryl and Eric explained.Seek a lender by interviewing several and choose who you .like; ask for referrals from people you trust too!

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