Loan Officer Gustan Cho
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If you delete collection accounts, charge-off accounts, late payments, or other non-public reporting derogatory credit tradelines, those do not matter and it will not be triggered during the public records search. Only public records will get discovered even though it is not on the credit report or has been deleted.
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Yes, a gift of equity can be used in an FHA purchase; however, this is meant to cover most of the down payment and closing costs. Some limitations exist when using a gift of equity to pay off debt as part of the transaction.
Things to Consider:
HUD Agency Mortgage Guidelines on FHA Loans:
Down Payment and Closing Costs: According to FHA, the minimum 3.5% down payment can be paid by the gift of equity, which also covers closing costs.
Debt Payoff: It is not common for people to use their gifts to pay off taxes, but the Federal Housing Administration guidelines allow it. Use a gift fund if it helps lower your debt-to-income ratio so you can easily qualify for a mortgage.
Lender Requirements: Lenders must record all documents regarding these transactions properly, such as stating in writing that no loan was involved and repayment is not expected. They also need to determine whether settling debts aligns with their policies based on what they know about internal procedures at different banks and national rules set forth by HUD.
Approval Process: It will work best to discuss this idea early enough with your loan officer, who should be able to tell whether such an arrangement meets the necessary conditions, depending on which they may have obtained approval beforehand from appropriate quarters since they vary considerably.
Usually, when buying through an FHA program, you would use a gift of equity for the down payment and closing costs. However, it could also pay off debt under the lender’s policy. Make sure you follow the rules set by HUD and consult with your lender about how it will affect the approval process before deciding anything.
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Financing a condotel (condo hotel) unit can be more difficult than financing a traditional or single-family home. However, there are options available. Particularly through non-QM loans. Here’s what you need to know about your choices:
Mortgage options for condotel financing
Non-QM loans
Bank statement loans: If you’re self-employed and can’t qualify using traditional income documentation, these are for you. Lenders will evaluate your income based on deposits made into your bank accounts over 12-24 months. Bank statement loans can be used for condotel units in the Florida Keys.
Asset depletion loans: Some lenders may calculate your income based on the value of your available liquid assets rather than using traditional income documentation.
DSCR loans (Debt Service Coverage Ratio): Aimed at investment properties, these mortgages consider the cash flow of the property rather than the borrower’s income. As such, they’re ideal for units within a condotel that generate rental income.
Portfolio loans
Unlike other mortgage types, portfolio loans aren’t sold on the secondary market. Instead, they’re held by the lender — who has more flexibility. Unique properties like condotels (which might not qualify under traditional loan programs) often rely on this type of loan.
Interest-only loans
For an interest-only mortgage, you’ll pay interest for an initial period before starting to pay down the principal. Some non-QM lenders offer interest-only condotel products.
Jumbo loans
You might need a jumbo loan if the condotel is considered a high-value property. These are offered by non-QM lenders with more flexible standards regarding condotel financing.
Bank statement loans for Florida Keys’ condotels?
Yes, bank statement mortgages can finance a Florida Keys-based condo-tel purchase. Even traditional lenders do not offer funding options, given their unique nature. Still, there are always non-QM lenders who tend to be more accommodating regarding these types of loans.
What should I do next?
Contact a non-QM lender: Talk with one of these lenders specializing in non-QM loans about your condotel financing needs.
Prepare documentation: If you’re going for a bank statement loan, get 12-24 months’ worth of statements together to prove your income.
Consider investment potential: If the condotel will generate rental income, a DSCR loan might also be good. This is because it considers how much money can be made from renting out property like yours.
These choices offer flexibility for financing a condotel unit. This is especially true in hotspots like the Florida Keys.
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A normal loan assessment can typically move from one lender to another. However, this depends on some conditions:
Key Points:
Lender Cooperation: The appraisal must be released by the first lender to the second lender. Some lenders may want to do something other than this. They might have paid for the appraisal upfront and don’t want to give it away for free.
Appraisal Independence: An appraisal must satisfy the Appraisal Independence Requirements (AIR) to be eligible for transfer. This means an AMC or some other independent process ordered it, so no undue influence is involved.
Acceptance of New Lender: The new lender should agree to accept transferred appraisals. However, some lenders may need an appraisal under their name to ensure it meets their underwriting standards.
Time Sensitivity: Appraisals usually have a validity period (normally around 120 days). If you move outside of this window, you may need another valuation.
Process:
Request the Transfer: You or your original lender must request the report on your evaluation’s transfer to its new home with another bank.
Complete Required Forms: The new lending institution may require certain documents or forms when processing this.
Verification by New Lender: They will examine whether everything is alright based on their views about what all appraisals should contain, etcetera.
Considerations:
Costs: Even if appraisals are transferred between institutions, there might still be costs associated with verifying them and updating them where necessary.
Delays: Transferring can sometimes take too long; thus, if you know that time is running out, it might be wiser to order another one.
It is possible but also complex since both sides must act according to rules set by regulators. Therefore, it is recommended that you contact all parties involved.
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Deleting a bankruptcy from your credit report might help you qualify for a mortgage sooner, BUT not so FAST. I know credit repair companies that can delete bankruptcies, foreclosures, deed-in-lieu of foreclosure, short sales, judgments, tax liens, student loan defaults, child support judgments, and other derogatory credit tradelines. The automated underwriting system will not pick up the deletions and render an approved/eligible per AUS. The above derogatory credit tradelines are public records. All mortgage lenders do a national third-party, public records search on each borrower during the mortgage process. However, lenders frequently keep internal records or require standard waiting periods after a bankruptcy discharge, regardless of the report status. Mortgage lenders verify financial history outside credit reports, through third-party national public search vendors such as Lexis Nexus, Data Verify, or other Public Records Search Companies. Therefore, deleted bankruptcies and other public records will be revealed during the national public records search. Borrowers with deleted public records, such as bankruptcies and foreclosures, won’t get mortgages approved without meeting wait requirements. Talking to a loan officer is the best way to determine what will work in your case.
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A conventional loan for a home can be granted to a buyer five years after the sale when they have already paid 5% of their mortgage. The following are some basic details:
Waiting Period for Conventional Loans After a Short Sale
Standard Waiting Period: The usual time to wait before qualifying for a conventional loan after a short sale is four years.
Exception: Sometimes, lenders will consider that the short sale was due to unavoidable circumstances, such as a job loss or serious health problem. Then, reduce the waiting period to 2 years, which is uncommon and often requires solid documentation.
Down Payment Requirements
Minimum Down Payment: For those who have waited out the four years, usually a 5% down payment required
Higher Down Payment: If your credit score suffered from this event. Some lenders may want more money upfront as an extra assurance against riskiness.
Credit Score Requirements
Good Credit: You typically need at least a 620 credit score to qualify for a conventional loan; however, higher scores (680+) might be necessary after experiencing short sales for best terms.
Rebuilding Credit: Restoring one’s reputation by not making late payments is crucial. I am avoiding significant negative marks on the record after having undergone such a process as selling property below its market value.
Other Considerations
Debt-to-Income Ratio (DTI): Your ability to manage your new mortgage payment and other debts will be assessed based on your DTI ratio, which must fall within acceptable limits set by your lender.
Reserves: If further cushioning against default risk is needed, the lender may require that the borrower have a certain amount saved up, which can cover several months’ worth of mortgage payments.
As long as you meet the minimum four-year waiting period and can put at least five percent down on your prospective home. You should qualify for a standard type of loan. Work on getting your credit score up to par and ensure that your debt-to-income ratio is reasonable so the deal goes through without problems.
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Acquiring an FHA loan for a home that has been auctioned can be hard. This is because HUD necessitates property inspections. It is often the case that auctioned homes are only allowed before purchase. However, these tips might help:
Understanding the FHA Requirements
Inspection Requirement: An appraisal verifies whether a home meets specific safety, security, and sound standards as FHA loans require. This involves inspecting the property using a HUD-approved appraiser.
Appraisal vs. Inspection: The appraisal serves as an inspection. The appraisal needs to be more detailed than traditional ones. HUD requires the home appraisal to check for issues that would make it ineligible for financing through them.
Strategies for Buying Auctioned Homes with an FHA Loan
Consider Post-Auction Financing: If you can’t secure FHA financing until after the auction closes, consider buying with another type of financing. Alternative financing options include non-QM loans, hard money loans, or cash. When closing, use a bridge or alternative financial sources, then refinance it later with an FHA loan. However, this is risky. So, ensure that there is enough money or different funding options.
Check Auction Terms: Occasionally, some auctions permit a “subject to financing” clause. The subject-to-financing clause is where the purchase agreement becomes null and void unless the buyer gets financed. This could include getting approved under Federal Housing Administration guidelines. However, it’s uncommon. Hence, it is worth checking out the terms provided by auction houses themselves.
Government-Owned Auction Properties: A few government-owned properties, like those sold via HUD, may accept purchases made with a Federal Housing Administration mortgage. They generally allow inspections before sale, too, which may only sometimes be possible in other cases. Thus making them available on websites like HUD Home Store. It might save time if interested parties are interested in such listings beforehand.
Alternatives to FHA Financing
Conventional Loan: Consider obtaining conventional loans if inspection issues prevent qualifying for a Federal Housing Administration mortgage. Some lenders have less strict requirements regarding this matter.
Rehab Loans (FHA 203(k)): You may want to look into these types of mortgages when dealing with auction houses that require substantial renovations. One can finance both the purchase price and renovation costs through them. However, you still need an inspection, so either find those auctions that can be permitted or think about refinancing after acquiring ownership.
Due Diligence
Research Auction Properties: Research a specific property before participating in its auctioning process using various sources, such as public records and previous sales information.
Work with a Real Estate Agent: It would also be wise to involve agents specializing in such transactions. They are well conversant with the industry dynamics, and thus, their input could prove invaluable during decision-making and finding suitable candidates who meet FHA financing criteria.
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You have a few options for cashing out on your properties, whether one at a time or through a blanket mortgage. Below is how each option works.
Individual Cash-Out Refinances
First Property (Paid Off): With this property being free and clear, you shouldn’t have any problem qualifying for a cash-out refinance. Generally, lenders allow cash outs of 70-80% of the appraised value. On a $69K property, pull out anywhere from $48,300 – $55,200.
Second Property (With Loan): This property can also be cashed out, but first, the existing mortgage must be paid off with the new Loan. Assuming equity, some of that could be pulled out subject to the same 70-80% LTV limit.
Blanket Mortgage
What Is A Blanket Mortgage? A blanket mortgage is when multiple properties are under one Loan, allowing leverage to combine the debt of both houses.
Advantages: A blanket mortgage might allow you to access more cash than refinancing each property separately. It also simplifies things by requiring only one Loan instead of multiple mortgages.
Loan-to-Value (LTV) Ratio: Typically, a lender may offer 70-75% LTV on the combined value of both properties. Based on your property values ($137K combined), you could cash out between $95,900 and $102,750.
Considerations: These are usually used by investors with many properties, so they may have stricter terms, like cross-collateralization, where if one defaults, it affects all.
Both Options Considerations
Lender Requirements: Specifics such as LTVs, interest rates, and terms will vary among lenders, so shop around and consider someone specializing in investment property financing.
Equity & Cash Flow: Make sure that after factoring in new loan payments, the cash-out refinance or blanket mortgage still allows for positive rental income.
You can either cash out and refinance each property individually or use both properties in a blanket mortgage. The best option depends on your financial goals. How much equity do you want to tap into? Are you okay with dealing with multiple loans? Or would you rather have one? Speaking to an investment-savvy mortgage broker should help guide this decision.
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Christian, you can contact me at gcho@gustancho.com. Lending Network, Inc. or Marga Jurilla at marga@gustancho.com. @marga
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