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Old 03-13-2016, 11:06 AM
 
5 posts, read 4,692 times
Reputation: 10

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This is my first post and my fiance and I are desperate for some creative ways to be able to finalize our purchase, here is our situation:

-Engaged currently, will be married in September 2016
-I currently own and rent out a condo
-My salary: $85k, her salary: $48k
-In Illinois
-We are currently renting
-$40k combined savings
-No debt of any kind except for my current mortgage
-Both of our credit scores in the upper 700s nearing 800.

We were talking with our lender and said that we were interested in multi-unit properties to be owner occupied. He knew all of our stats and the amount of our savings. We found a 3-flat and were pre-approved in the mid $600s, planning to use the FannieMae HomeReady program. After a contract and inspection, we are about to finalize attorney review with an agreed upon price of $650k and $8k in closing credits.

Throughout this time we had been thinking that the HomeReady program would allow my fiance to buy, use my income to qualify, and we would only need a 5% down payment. This is all true except for the last part. On Friday we were informed by our lender that there was a mistake and that we actually need 25% down for the HomeReady program on a 3-unit property. We are devastated as we were all in on this and it's a great investment for us to live/invest in.

He said that there are four options that he has: 1) Cancel the transaction, 2) For me to sell my current condo (not going to happen in this time frame with current renters) and use the FreddieMac Home Possible program (5% down on 3-unit, but cannot currently own property), 3) Somehow get the loan down to $565k to qualify for FHA, 4) Somehow come up with $130k to get to the 25% down.

With our incomes together and the rental income from the other two units, we qualify for the payments but it seems that in HomeReady we need 5% down and in HomePossible we both need to be borrowers and not own property.

Can anyone here help us? Is this deal deal or is there any way to close on a 3-unit property (loan $50k higher than FHA limits) with 5% down when one of us owns property already?

Thanks so much
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Old 03-13-2016, 11:58 AM
 
254 posts, read 454,844 times
Reputation: 616
So the 5% down would have basically completely consumed your savings at a time when you are taking on a debt 5 times your yearly salary, while you already have additional debt in another property? I can't imagine a lender looking at this and not thinking its a bad idea. If you lose your job for even a few months, or have major repairs required on the property unexpectedly, or even have trouble finding tenants for a few months, you're going to be in a dangerous spot with staying up to date on the payments.
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Old 03-13-2016, 07:44 PM
 
Location: Michigan
2,741 posts, read 2,963,800 times
Reputation: 6540
25% down is normal for an investor NON-owner occupied property with a commercial mortgage.

Are you going to be living in this property, and renting out the other two apartments? If so, you can finance up to a fourplex with a conventional NON commercial mortgage, but only if it's owner occupied.

Find a good mortgage broker, that originates the mortgage themselves. They'll sell it to somebody else after it's closed, but that won't change anything for you beyond sending the payment to another servicer.
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Old 03-13-2016, 09:11 PM
 
Location: Phoenix, AZ area
3,365 posts, read 5,187,588 times
Reputation: 4203
Quote:
Originally Posted by msh1285 View Post
This is my first post and my fiance and I are desperate for some creative ways to be able to finalize our purchase, here is our situation:

-Engaged currently, will be married in September 2016
-I currently own and rent out a condo
-My salary: $85k, her salary: $48k
-In Illinois
-We are currently renting
-$40k combined savings
-No debt of any kind except for my current mortgage
-Both of our credit scores in the upper 700s nearing 800.

We were talking with our lender and said that we were interested in multi-unit properties to be owner occupied. He knew all of our stats and the amount of our savings. We found a 3-flat and were pre-approved in the mid $600s, planning to use the FannieMae HomeReady program. After a contract and inspection, we are about to finalize attorney review with an agreed upon price of $650k and $8k in closing credits.

Throughout this time we had been thinking that the HomeReady program would allow my fiance to buy, use my income to qualify, and we would only need a 5% down payment. This is all true except for the last part. On Friday we were informed by our lender that there was a mistake and that we actually need 25% down for the HomeReady program on a 3-unit property. We are devastated as we were all in on this and it's a great investment for us to live/invest in.

He said that there are four options that he has: 1) Cancel the transaction, 2) For me to sell my current condo (not going to happen in this time frame with current renters) and use the FreddieMac Home Possible program (5% down on 3-unit, but cannot currently own property), 3) Somehow get the loan down to $565k to qualify for FHA, 4) Somehow come up with $130k to get to the 25% down.

With our incomes together and the rental income from the other two units, we qualify for the payments but it seems that in HomeReady we need 5% down and in HomePossible we both need to be borrowers and not own property.

Can anyone here help us? Is this deal deal or is there any way to close on a 3-unit property (loan $50k higher than FHA limits) with 5% down when one of us owns property already?

Thanks so much
None of that is true, you can google it and see but here is the link to the fact sheet below. A 3-unit home require 75% LTV, it says "3- to 4-unit: 75% FRM only". Also I don't know why you would think your income would count because it says "non-borrower income is not considered qualifying income and is not applied to income limits". Also it says "Occupant borrower(s) may not have an ownership interest in any other residential property at the time of closing" so you can't go on the loan because you own that condo.

HomeReady is completely wrong for your intended purchase and your loan officer should have known that after taking 2 minutes to read the fact sheet, I didn't spend that much time on it and I'm not a loan officer. I would start calling some brokers to pull this deal back together but good luck.

https://www.fanniemae.com/content/fa...uct-matrix.pdf
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Old 03-13-2016, 09:24 PM
 
5 posts, read 4,692 times
Reputation: 10
Quote:
Originally Posted by Brinson View Post
So the 5% down would have basically completely consumed your savings at a time when you are taking on a debt 5 times your yearly salary, while you already have additional debt in another property? I can't imagine a lender looking at this and not thinking its a bad idea. If you lose your job for even a few months, or have major repairs required on the property unexpectedly, or even have trouble finding tenants for a few months, you're going to be in a dangerous spot with staying up to date on the payments.
I didn't realize you know my entire financial profile from my brief posting. Nor that you knew how much rental income the units were bringing in. Thanks for the lecture that I didn't ask for.
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Old 03-13-2016, 09:26 PM
 
5 posts, read 4,692 times
Reputation: 10
Quote:
Originally Posted by AZ Manager View Post
None of that is true, you can google it and see but here is the link to the fact sheet below. A 3-unit home require 75% LTV, it says "3- to 4-unit: 75% FRM only". Also I don't know why you would think your income would count because it says "non-borrower income is not considered qualifying income and is not applied to income limits". Also it says "Occupant borrower(s) may not have an ownership interest in any other residential property at the time of closing" so you can't go on the loan because you own that condo.

HomeReady is completely wrong for your intended purchase and your loan officer should have known that after taking 2 minutes to read the fact sheet, I didn't spend that much time on it and I'm not a loan officer. I would start calling some brokers to pull this deal back together but good luck.

https://www.fanniemae.com/content/fa...uct-matrix.pdf
I don't think you read the part about "Non-Borrower Household Income" being permitted as a compensating factor. And as a non-borrower, the part about me owning a property does not apply.
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Old 03-13-2016, 10:33 PM
 
Location: Phoenix, AZ area
3,365 posts, read 5,187,588 times
Reputation: 4203
Quote:
Originally Posted by msh1285 View Post
I don't think you read the part about "Non-Borrower Household Income" being permitted as a compensating factor. And as a non-borrower, the part about me owning a property does not apply.
I read it but like I said I only spent a couple minutes on it. It actually says "Permitted as a compensating factor in DU only to allow a debt-to-income (DTI) ratio >45% up to 50%". There is reserve requirements that you also don't meet, 6-12 months depending on credit, and likely an issue in any other programs available too. It may qualify but really it doesn't make any difference as the program is completely wrong for you and your LO should have seen that already. If it were me I would be pretty pissed that they didn't catch the LTV requirements before you started doing inspections; but I also would have looked up the program myself because for every good LO there is 30 bad ones.

The important part of my other post though is your only hope to salvage the deal is to call some brokers and see if they can manage to come up with something, it wont be with this program though.
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Old 03-13-2016, 11:20 PM
 
254 posts, read 454,844 times
Reputation: 616
Quote:
Originally Posted by msh1285 View Post
I didn't realize you know my entire financial profile from my brief posting. Nor that you knew how much rental income the units were bringing in. Thanks for the lecture that I didn't ask for.
Wasn't judging you. Just saying that is how a lender will think about it, and on a low equity loan itsbvery high risk for them. The rental income is never guaranteed every month, but the debt is guaranteed. The lender will want to know you can float the loan for a time in case of really bad luck, like all the tenants moving out close to each other and it taking time to rerent.

But if you want to get all pissy maybe you could just learn to read because clearly you didn't read anything about the loan program as it clearly wasn't going to work for you from day one.
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Old 03-13-2016, 11:59 PM
 
Location: Southern California
4,453 posts, read 6,765,643 times
Reputation: 2233
I take it you don't have over $130k and then some in equity in the rental condo?

You can try to work with a loan broker that works with different TYPES of lenders or try to call a bunch of lenders yourself. You might even ask in the local forum since lending varies by location. I saw a local program that had high interest but easy qualifying on just the investment properties, as long its income was a lot higher % than the total monthly debt.

As far as the rental condo, if you have significant appreciation and you have lived it , you might want to consider selling it if you can take advantage of tax laws or 1031 exchange. I know it doesn't fall into the time frame for the current transaction, but maybe you can ask for more time.
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Old 03-14-2016, 06:00 AM
 
5 posts, read 4,692 times
Reputation: 10
Quote:
Originally Posted by Brinson View Post
Wasn't judging you. Just saying that is how a lender will think about it, and on a low equity loan itsbvery high risk for them. The rental income is never guaranteed every month, but the debt is guaranteed. The lender will want to know you can float the loan for a time in case of really bad luck, like all the tenants moving out close to each other and it taking time to rerent.

But if you want to get all pissy maybe you could just learn to read because clearly you didn't read anything about the loan program as it clearly wasn't going to work for you from day one.
Sorry man, frustrations got the best of me. As I'm not a mortgage broker, I'm not sure why I should be the expert here in reading up on mortgage programs. If the guy we are paying as the expert says it's doable and gives us pre-approval for it, why should I doubt him?

Lesson learned.

Last edited by msh1285; 03-14-2016 at 06:29 AM..
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