O.K., so I am looking to purchase an investment property. I have already been qualified with a HML that will pay 100% PP, 100% Rehab costs, and roll all the points and closing costs into the loan with a 6 month interest reserve up to 70%ARV. So basically if I can find a deal far enough below FMV then I will have 100% financing…doesn’t seem to hard in this market!
Now I have to refi at or before 6 months and I wanted to know how hard it would be to do a cash-out refi? What are the current LTV required for a conventional refi? Is it impossible now for investor to do a cash-out refi with FHA?
I’m not sure if many hard money lenders will actually give you 100% with no money or “skin in the game” . In the area I am looking in there are many REOs that are cheap, but they seem to be going around the asking price or above asking price. Basically 100% of the cheap properties are REO homes. There is a big demand for these properties and they go quick, The HML is going to be looking at the current comps , so it might be hard to get something 30% under “fair market value” if you are in this type of market.
I have already found the HML that will do 100% financing and im my area (Atlanta) finding REO deals 30% below market value is not that hard, but once you role in the points, closing cost and holding costs then getting below that 70% ARV might be tough.
70% LTV is not going to get you refinanced out of the hard money without coming out of pocket with some cash. Your max LTV on the refinance is 75% and Fannie/Freddie have a 1.75% cost because of the property being a rental. That leaves you 3.25% for all of your other costs like bank fees, origination, escrows, pre-paids, etc… not to mention the loan level pricing adjustments if you have less than a 740 FICO score.
You need to be at 65% or less to make sure you have room to roll all of your end loan costs in.
If the LTV is low enough you should have no problem refinancing and cashing out. The way investors get stuck in these deals is that they do not calculate the value of the house when it is complete using only the value they either believe it is or by adding the construction cost and purchase price. Speak to a local appraiser or Realtor (better with appraiser as Realtors tend to be over zealous or agressive in pricing to get the deals) to get a subject to completion value in today’s marketplace. If the lender requires an appraisal, spend a little more and find out the as is value and the subject to completion value. Ask the appraiser to be conservative and realistic. good luck
I agree with Christopher, you need to be in for less than 70% to make this work for you. Give yourself some cushion and don’t go above 60%. Especially in the Atlanta market, you will soon find that expenses quickly add up and without that extra cushion you will be comming out of pocket soon enough.
JL, I’m not sure but I believe the HML in this case is EDC, someone told me on the phone the other day that they approved them for 100% financing in Atlanta. They were shopping me for a better rate.
A question, if after 6 month past how easy I can cash out refi NOO property if I’m self-employed and show very low income on my return? Is there any banks out there do this?
You are allowed to add back items like depreciation and depletion so you may be able to show more income than you are thinking. If you have good credit and lots of assets you may be able to overcome high DTI issues.