Real Estate Investor Loan Options
by Lisa in Long Beach, CA and by Laurie from Gainesville, FL
Ask Kate about real estate investor loan options: Lisa in California wants to purchase a multi-family dwelling and plans to live in one of the units. Because she had a foreclosure three 1/2 years ago, she asks for options other than conventional and FHA financing. Laurie in Florida owns a 4-plex and cannot refinance it without paying the lender $30,000. That's not much of an option, is it? I have another idea!
2-4 Unit Owner-Occupied Mortgage Financing After Foreclosure By Lisa in Long Beach, CA
I am looking to purchase a multi-family dwelling and plan to live in one of the units. I have a question about my mortgage options. I have enough for 5-10% down and closing costs.
A little history...
Three 1/2 years ago I had a foreclosure and received a settlement under the national bank settlement.
Due to the foreclosure, I am being told I can only qualify for FHA financing and not conventional financing. I could get FHA financing with a 3.5% downpayment but would need to wait 3 1/2 more years to qualify for conventional financing.
Are there any other options out there? I am in Long Beach, California, if that helps. I am looking at multi-family owner-occupant homes as a possibility.
Thank you for any help you can give, Lisa
Ask Kate answers: 2-4 Unit Owner-Occupied Mortgage Financing After Foreclosure
I'll assume when you say multi-family that you are referring to a 2-4 unit dwelling, not an apartment building over 4 units because they require commercial financing.
Before I get into the details of financing, I will mention that the mortgage approval process after foreclosure is an arduous undertaking. So be good to yourself! Prepare complete paperwork and give it to your lender in one package at the time of application. This will help you get a more reliable underwriting response and endear yourself to the mortgage originator. Use my Mortgage Checklist to get your ducks in a row
Conventional Financing for Owner-Occupied Multi-Family Units
As you mentioned, Fannie Mae and Freddie Mac conventional guidelines require larger downpayments when financing an owner-occupied duplex, triplex, or 4-plex as opposed to FHA financing.
For fixed rate owner-occupied programs, downpayments generally run between 15% and 25% of the purchase price, depending on the number of units (2, 3, or 4) and the credit profile of the borrower.
For example, a borrower is required to put down $45,000 to $75,000 on a $300,000 2-4 unit home as long as they are going to live in one of the units.
Other loan approval considerations (and thus down payment considerations) are the vacancy factor among rental properties in your city and whether or not you have a history as a landlord.
Apart from underwriting decisions, I encourage you to prepare a budget, planning for the inevitable months when a property brings in no rental income. Ideally, you should be able to pay the entire mortgage payment without the assistance of renters.
FHA Financing for Owner-Occupied 2-4 Units
FHA financing is limited to owner-occupied, not non-owner-occupied homes. But FHA makes an exception for 2-4 unit properties, as long as the homeowner lives in one of the units.
FHA loan limits for Long Beach, California are $625,500 for single family, $800,775.00 for 2 units, $967,950.00 for 3 units, and $1,202,925.00 for 4 units. Go here for the link to locate FHA Loan Limits for your city
Government Subsidies, Private Money, and Local Lenders for Owner-Occupied 2-4 Units
Other financing options include seller financed mortgages
, private investors, and community banks
I also recommend that home buyers of rental properties in neighborhoods undergoing revitalization explore local government downpayment subsidies. Go to Housing and Urban Development (HUD) Grants for the City of Long Beach, California
Underwater Real Estate Investor Loans By Laurie from Gainesville, FL
Is there anything new to offer investors who owe more than the property is worth?
I have a mortgage at 6.75% interest on a quadraplex and cannot refinance without bringing about $30k to the table.
Am I just stuck?
Ask Kate answers: Underwater Real Estate Investor Loans
Making Home Affordable (MHA) offers HARP refinance loans to underwater investors
. Of course, your mortgage will need to be backed by Fannie Mae or Freddie Mac to be eligible.
Otherwise, MHA opened up the HAMP modification program to homeowners of underwater investment properties
a few years ago. If your lender participates in the program, call your loan servicer to begin the process.
You should know this. Although participation in the program is voluntary if the loan is not backed by Fannie Mae or Freddie Mac, many loan servicers still offer modifications.
If your mortgage is not backed by Fannie or Freddie and your loan servicer does not participate in HAMP, you need to write your representatives in the government to ask if HARP 3, the Obama Refi Plan to Protect the American Dream
is myth or fact.
How to Contact Washington D.C., Write Your Government Agencies, and File a Mortgage Complaint
You have the power to make a change! Contact your elected representatives and government agencies to tell your story, file a complaint, express an opinion, and request changes that affect homeownership.
1. Submit a complaint with the Consumer Financial Protection Bureau, established by Congress to protect consumers, or you can call 855-411-2372.
2. Go to WhiteHouse.gov, 'Contact Us' to reach Corresponding with the White House. This is is a quick and simple way to write the President, telling about your struggles with homeownership and ask for specific change.
3. Go to Senate.gov, 'Find Your Senators', scroll down to your state and click. You will be given your US Senators with contact information. Send the same letter you sent to the White House.
4. Go to House.gov, 'Find Your Representative' and fill in your zip code. You will be given your House of Representatives with contact information. Send the same letter you sent to the White House and Senate.
5. Go to State.gov Of course, first fill in your state's name. Then on your state website, do a search (for example, 'mortgage help') to find contact information. Send the same letter you sent to the White House, Senate, and House of Representatives.
6. Call your Better Business Bureau to report specific companies. For example, report Rust Consulting to the BBB if you did not receive your settlement check.
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