Home Buying in Costa Mesa>Question Details

Annie, Home Buyer in Walnut, CA

Refinance loan or Mortgage Loan, pro and Con, pleaseee

Asked by Annie, Walnut, CA Mon Feb 28, 2011

Im thinking about making a cash offer on 1 house.--I could get a good deal with the price way below the market place...However, after that, can I take the equity loan out (right away)with possibly (?) higher than the price that I paid for ??? or should I just borrow straight up from lender as an investment house??
what is the pro and con of each way ( I am planing to buy my own house in next couple month) and the house that I offer cash is a condo will use as rental income....I would refer it affect the lest to my ability to buy my own house....Thanksss

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Justin Ruzicka’s answer

You really need to consider the affects on your debt to income ratio the "Investment" property will have. Even though you will have it rented out before purchasing another home, very few if any lenders will look at the Rental Income as INCOME, to your household. I have dozens of rental properties i have been doing this for over a decade so my experience and knowledge are second to none, when it comes to rentals and how lenders view them. Lenders want to see 2 years worth of Income/rent payments before they will recognize that as income to you. It sucks, but it is true. Then even when they do recognize it, they only recognize 70% of it...yep, because they know that you have to pay taxes and insurance and in this case likely an HOA few, all those combined will easily be 30% of the money you are getting from rent.
Here is just one blog I have written on Real Estate Investments.

Best of luck.
If you have found this answer to be the best, please mark it as such, thank you for your time and consideration.
Web Reference: http://blog.house-guy.com/
1 vote Thank Flag Link Wed May 4, 2011
Hi Annie,

It is important to look at both your current situation and your future situation when considering whether to purchase cash or obtain a loan, especially since you intend to purchase your home in the near future.

What makes the most sense will likely depend upon your personal situation - how much cash you have, the likely purchase price of both properties, your income and other details. Making the wrong decision will effect your ability to buy your own home later.

I recommend you contact Mary Lou Finney at 949-400-1017. She has been a mortgage broker for three decades and can help you determine the best course of action based upon your goals.
Web Reference: http://www.donovanblatt.com
0 votes Thank Flag Link Fri Apr 8, 2011
Hi Annie,
I agree, it is good you are considering your options now....I think it would be smarter to use the mortgage to purchase, it certainly would give you a bit wider option on lenders, and assure you of the best rate for the investment property.
Rudi's program sounds great, but if is only available through one lender, you only have one price...so no choice or competitive rates. Best wishes, Jim, HSOA.
0 votes Thank Flag Link Tue Mar 1, 2011

We offer a Cash Recapture loan where you can receive 70% of the purchase price back as long as you apply within 90 days of the new homes HUD-1. If the condo is under $729,750 be sure the project is approved by either FannieMae or Freddie Mac.

Happy funding, Rudi
Web Reference: http://www.umboc.com
0 votes Thank Flag Link Mon Feb 28, 2011

Doing a refi on a lowball offer wont work. Most banks require some sort of improvements be performed otherwise they consider the sold price to be the market value until the purchase money loan is seasoned.
Web Reference: http://bob2sell.com
0 votes Thank Flag Link Mon Feb 28, 2011
Hello Annie;
I hope I understood your question and concern. If I understood it right, I think you should buy your owner occupied home first. If you have cash to buy your owner occupied, great, do it in cash. Once you purchased the owner occupied, depending how much equity you would have (comps at that time), you can cash out on your owner occupied and buy the investment property. I am a mortgage broker for last 15 years and I will always suggest the same to all my buyers. I don't think you should go to investment purchase until after you have your own house. Borrowing on Investment property is much tighter and rates are higher. But if you buy something for your own living as you mentioned, much lower than the Market Value, then you always have a chance to get an easier term and lower rate in your Cash out Refi loan. . Also I suggest you to visit my website @ http://www.deltamaxmortgage.com where you can search the MLS and find tons of information about Daily Mortgage Rate and programs etc...If you have more questions, please don't hesitate to call me at 949-510-1955.I will be more than happy to help you in this process.
Shadi Kian
0 votes Thank Flag Link Mon Feb 28, 2011
Hi Annie,
You are very smart to be thinking about these questions ahead of time. Yes, it is a great time to by a home and get a great deal. As for your loan questions and refinance questions you should really talk to a lender. You can call Jeff Ohland or Mark Ingram at Ingram Company and they'd be happy to talk to you. Please let them know that Holly said to call. (714) 241-1289. If you have any other questions don't hesitate to ask.
Holly Schwartz
0 votes Thank Flag Link Mon Feb 28, 2011
Dear Annie:
"Cash is King" only if you have enough of it. An offer of non-cash could trump you with a higher price. An experienced lender is your best bet for up-to-date answers to your lending questions. Agents have lots of answers, advice and experience - however the $$ comes from the lender. Go into your bank or call your lender today!
0 votes Thank Flag Link Mon Feb 28, 2011
Annie- You are certainly in a good position when you have all cash to buy a property- that can be tremendous leverage when you are negotiating the price.
Should you purchase now with all cash, a good first step would be to speak to a lender about how quickly you can take a mortgage out on the home. Some lenders have a 90 day waiting period after an all cash purchase before a mortgage can be taken out on a property.
Typically a lender will only give you about 80% loan to the value of the home, so taking a loan on the property for more than you paid for it might be very difficult unless you got a steal of a deal!
Generally you can get a much better deal and pay less for the house if you go in with a cash offer. You will also incur less fees upfront with this type of purchase.
As for the other home you plan on buying, a lender will only give you credit of up to 75% of the rental income on the investment property that you own, so factor that into your decisions as well. It might make sense to look at buying the home first, then the investment property second depending on how you might use financing to purchase. I think your best first step is to speak with a lender who can qualify your purchases. If you need a reference for a trustworthy lender, I would be happy to refer one to you.
Good luck!!
0 votes Thank Flag Link Mon Feb 28, 2011
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