Joe 401k?

[seattle-relo]

What is the minimum one needs to purchase an out of state investment property? With stricter lending standards, what type of down payment, income, etc is required?

[HLS]

There is no requirement that is different because it is out of state.
As long as you can qualify for an investment property loan, there are higher limits for conforming amounts on 2,3 and 4 units. 1 unit is $417,00, 2 units is $533,850, 3 units is $645,300 and 4 units is $801,950.

You can still get stated income/stated asset loans with a credit score above 680 on 1 or 2 units, with 25% down.
Full Doc you can go to 90% on 1-2 units (10% down) or 75% on 3-4 units (25% down)

Full Doc, Score above 680, with at least 25% down will get you the best rates, about 6.375%-6.50% today on 1 or 2 unit investment property. 30 YR Fixed P&I OR around 6% for a 5 YR interest only.

If buying in a vacation area, you can get better rates if buying a “2nd home” rather than a rental.
When figuring net rental income, lenders only credit you with 75% to allow for vacancy and maintenance, plus taxes and ins, etc for qualifying.

When buying a 2nd home, there is no rental income to use, just taxes and ins. so it’s a bit harder to qualify, but does get you better rates. 20% down= 6.25% 30 YR Fixed OR 5.75% 5 YR i/o

[HLS]

There is no requirement that is different because it is out of state.
As long as you can qualify for an investment property loan, there are higher limits for conforming amounts on 2,3 and 4 units. 1 unit is $417,00, 2 units is $533,850, 3 units is $645,300 and 4 units is $801,950.

You can still get stated income/stated asset loans with a credit score above 680 on 1 or 2 units, with 25% down.
Full Doc you can go to 90% on 1-2 units (10% down) or 75% on 3-4 units (25% down)

Full Doc, Score above 680, with at least 25% down will get you the best rates, about 6.375%-6.50% today on 1 or 2 unit investment property. 30 YR Fixed P&I OR around 6% for a 5 YR interest only.

If buying in a vacation area, you can get better rates if buying a “2nd home” rather than a rental.
When figuring net rental income, lenders only credit you with 75% to allow for vacancy and maintenance, plus taxes and ins, etc for qualifying.

When buying a 2nd home, there is no rental income to use, just taxes and ins. so it’s a bit harder to qualify, but does get you better rates. 20% down= 6.25% 30 YR Fixed OR 5.75% 5 YR i/o

[pertinazzio]

Bloat wrote “You can’t do much better than your ODMAX fund.” Yeah that’s right. It was just dumb look on my part as it just happened to be in the line up in my employee sponsored 403b. Initially I dipped in at 10% but when I saw how things recovered after that little “china” scare back in February I increased my allocation higher and higher. What I am doing is a calculated risk and definitely goes against standard investment advice which states that at 57 I should be much more oriented towards stable funds, cash, and bonds. My thinking is this: I am not where I want to be, there is not that much time to get there… why not lay it all (or nearly all) on the line? So far it is working but it is sure nerve-wracking . I was sweating bullets throughout August and now that its clear sailing again I am even more preoccupied with keeping up with every little gyration and story that may affect me. In a way its not healthy. I wish I could just take the position and forget about it for a while. The biggest threat to my position comes from “geopolitical risk” and terrorism. One or 2 dirty bombs somewhere could totally trash my “global growth” play for years. For those who can’t play ODMAX, Janus Overseas is a five star Morningstar fund with no load.

Beatus ille qui procul negotiis … paterna rura bobus exercet suis, solutus omni fenore….. Horace

[pertinazzio]

Bloat wrote “You can’t do much better than your ODMAX fund.” Yeah that’s right. It was just dumb look on my part as it just happened to be in the line up in my employee sponsored 403b. Initially I dipped in at 10% but when I saw how things recovered after that little “china” scare back in February I increased my allocation higher and higher. What I am doing is a calculated risk and definitely goes against standard investment advice which states that at 57 I should be much more oriented towards stable funds, cash, and bonds. My thinking is this: I am not where I want to be, there is not that much time to get there… why not lay it all (or nearly all) on the line? So far it is working but it is sure nerve-wracking . I was sweating bullets throughout August and now that its clear sailing again I am even more preoccupied with keeping up with every little gyration and story that may affect me. In a way its not healthy. I wish I could just take the position and forget about it for a while. The biggest threat to my position comes from “geopolitical risk” and terrorism. One or 2 dirty bombs somewhere could totally trash my “global growth” play for years. For those who can’t play ODMAX, Janus Overseas is a five star Morningstar fund with no load.

Beatus ille qui procul negotiis … paterna rura bobus exercet suis, solutus omni fenore….. Horace

[seattle-relo]

HLS – When you are qualifying for the rental property mortgage, how does the bank consider the rental income? I heard they allow you to apply 75% of the income to qualify. Is that usually the case? And how does the bank decide what the rental amount would be if it’s on a home that wasn’t previously a rental? My husband and I have talked at different times about rental property investments, but honestly we haven’t looked that much into all the areas to consider. It’s something we have interest in at some point in the future.
Thanks

[seattle-relo]

HLS – When you are qualifying for the rental property mortgage, how does the bank consider the rental income? I heard they allow you to apply 75% of the income to qualify. Is that usually the case? And how does the bank decide what the rental amount would be if it’s on a home that wasn’t previously a rental? My husband and I have talked at different times about rental property investments, but honestly we haven’t looked that much into all the areas to consider. It’s something we have interest in at some point in the future.
Thanks

[HLS]

75% allocated to rental income is correct, I think that I stated that above. With a full doc loan, they would like to see a signed lease, with a stated it may not be an issue.

Some lenders will request 1 or 2 additional forms from the appraiser to determine fair market rent for the property and operating schedule, which can cost an extra $50 or $100.

Absentee property ownership isn’t for everyone, nor would I recommend it on a tight budget. When small things go wrong, you need to pay someone to take care of them, it would be nothing if you lived nearby.

You cannot constantly drive by to check on things which would drive many people crazy. To me it’s not much different than owning a mutual fund. You are relying on your manager for both.

It’s hard to comprehend areas where a house is $125K, and many people cannot afford to buy, but there are renters in every market. It’s hard to pick the perfect area for a long term investment, but the depreciation write off and ROI potential works well for many willing to take the risk.

Although multi units can offer a better return, a single house can still be better than nothing.
It also allows you the occasional tax deductible trip to check on your investment.

Lenders are in business to loan money. Meet their criteria du jour and they will fund. The stronger you are financially, the easier it is to get funded, but it still takes jumping through hoops for full doc.

[HLS]

75% allocated to rental income is correct, I think that I stated that above. With a full doc loan, they would like to see a signed lease, with a stated it may not be an issue.

Some lenders will request 1 or 2 additional forms from the appraiser to determine fair market rent for the property and operating schedule, which can cost an extra $50 or $100.

Absentee property ownership isn’t for everyone, nor would I recommend it on a tight budget. When small things go wrong, you need to pay someone to take care of them, it would be nothing if you lived nearby.

You cannot constantly drive by to check on things which would drive many people crazy. To me it’s not much different than owning a mutual fund. You are relying on your manager for both.

It’s hard to comprehend areas where a house is $125K, and many people cannot afford to buy, but there are renters in every market. It’s hard to pick the perfect area for a long term investment, but the depreciation write off and ROI potential works well for many willing to take the risk.

Although multi units can offer a better return, a single house can still be better than nothing.
It also allows you the occasional tax deductible trip to check on your investment.

Lenders are in business to loan money. Meet their criteria du jour and they will fund. The stronger you are financially, the easier it is to get funded, but it still takes jumping through hoops for full doc.

[NotCranky]

Thanks HLS,
That loan info is interesting. One question. I have clients that plan on using HELOC money for down payment on investor property. I assume “no doc” it isn’t an issue . What about “full doc”? Does the down payment have to be seasoned? Please assume borrower does not have diversified non-collateralized assets. I already know that someone with a diversified investment portfolio shouldn’t have a problem.

[NotCranky]

Thanks HLS,
That loan info is interesting. One question. I have clients that plan on using HELOC money for down payment on investor property. I assume “no doc” it isn’t an issue . What about “full doc”? Does the down payment have to be seasoned? Please assume borrower does not have diversified non-collateralized assets. I already know that someone with a diversified investment portfolio shouldn’t have a problem.

[HLS]

NO DOC is different than STATED INCOME….
I don’t know if anyone still does NO DOC investment…
With STATED you still need to prove source of income, either job or pension/retirement etc, but do not need to verify income.

For Full Doc,
Safest thing to do is have the HELOC funds in their bank account for several months, so if lender wants to see 2 months bank statements, they can be produced without showing a large deposit on the first statement. The debt service will show on their credit report, and as long as they can qualify with DTI, should not be an issue. Create the seasoned assets. Additional liquid assets never hurt the file.

Ya never know what a lender will ask for. Even with a FNMA approval, each lender can still ask for additional documentation, which isn’t known until an UW reviews the file…

I had a situation this week, a retired borrower has a new job, full time, but only for 8 months. One lender wouldn’t accept the income, as THEIR minimum is 2 years employment, even though it wasn’t a concern for FNMA. Another lender said full time would be OK.
Qualifying is on a case by case basis.

With higher credit scores, 700+ there are still options.
One honest late mortgage payment can send a high earning, 780 score, with no other debt down 100 points or more…
It’s a crazy gauge. SCORE and LTV are big factors.

[HLS]

NO DOC is different than STATED INCOME….
I don’t know if anyone still does NO DOC investment…
With STATED you still need to prove source of income, either job or pension/retirement etc, but do not need to verify income.

For Full Doc,
Safest thing to do is have the HELOC funds in their bank account for several months, so if lender wants to see 2 months bank statements, they can be produced without showing a large deposit on the first statement. The debt service will show on their credit report, and as long as they can qualify with DTI, should not be an issue. Create the seasoned assets. Additional liquid assets never hurt the file.

Ya never know what a lender will ask for. Even with a FNMA approval, each lender can still ask for additional documentation, which isn’t known until an UW reviews the file…

I had a situation this week, a retired borrower has a new job, full time, but only for 8 months. One lender wouldn’t accept the income, as THEIR minimum is 2 years employment, even though it wasn’t a concern for FNMA. Another lender said full time would be OK.
Qualifying is on a case by case basis.

With higher credit scores, 700+ there are still options.
One honest late mortgage payment can send a high earning, 780 score, with no other debt down 100 points or more…
It’s a crazy gauge. SCORE and LTV are big factors.

[NotCranky]

HLS, I wonder if you would consider making a thread something like the “Carmel Valley Monitor” but with updates on loan program availibility with examples of loan amounts, LTV , rates, terms, Fico scores,etc. Perhaps you could upsdate it every now and then?
I think that would be great if we Piggs could easily look at something like that and perhaps post a question. I think you are the only loan guy who has come forward and put out good stuff. You could dedicate it to me, as is the fashion(That is a joke).
Best wishes,

[NotCranky]

HLS, I wonder if you would consider making a thread something like the “Carmel Valley Monitor” but with updates on loan program availibility with examples of loan amounts, LTV , rates, terms, Fico scores,etc. Perhaps you could upsdate it every now and then?
I think that would be great if we Piggs could easily look at something like that and perhaps post a question. I think you are the only loan guy who has come forward and put out good stuff. You could dedicate it to me, as is the fashion(That is a joke).
Best wishes,

[Author]

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