I am looking to refi w/cash out. I am newer real estate agent w/6 months experience but need more capitalization to get business going. FMV of SFR is 700K. Approx 400K loans against it. I am considering taking out new 1st of 500K. I'd use 15K for improvements to SFR and 85K to capitalize business efforts and pay bills for next 12 months. (85K also being the source of payments on the new first for 12 months assuming worst case scenario of no income). Also have 36K in 401K, 2K savings. Am married, empty nest, spouse not working. I think my FICO is around 708. What loan products should I be looking at? And what kind of points, if any? I am considering getting a stated income loan for 5 years fixed, interest only, amortized for 30. I am leaning towards having no pre-pay so that if it turns out I'm not a good fit for this business, I can sell the property and move on to something else. What do some of you loan folks think?

Your definitley going to need a NO-DOC loan. However your LTV will be between 71 and 75% so that will be fine. I like interest only for you as it keeps you monthly obligation low. I just looked at some pricing on a 5 year fixed nterest only loan around 7.5% on a NO DOC at 75% LTV cash out IO. I would expect to pay about a point on the front. The reason I am stating NODOC is beacuase your recent job change. What line of work did you come from? was it comision only?

At that rate your looking at an IO payment of $3125 a month before taxes and Insurance.

I am sure somone will probably blast me for suggesting IO cash out loan to a person who doesn't have a guaranteed income. However is is your equity and you should spend it however you like... Just be aware that this is an up and down business. The downs can be devestating if you do not budget. The fact that your escape plan if it doesn't work out is to sell your house makes me nervous for you, but I would say you thought it through.

I was a paralegal for eight years before real estate. Earned about 85K/year salary plus OT, bonus, etc. In the last 6 months I've earned 15K commissions, but narrowly missed an additional 35K commission when a buyer backed out of a deal due to death in family. Had that deal closed, I'd be at 50K for 6 months, so thinking positive, I think this business might be feasible for me. But I can't count chickens not hatched.

Local projections are for 5% appreciation in my market over next 12 months. If true, then my interest only payments will be offset by increased sales price if it comes to that. I'd probably down-size my home anyway in the next 3 or 4 years, regardless of what happens.

Go stated. Stay away from NO DOC. 5/1 I/O is a good move since your leaving the home in 5 years anyways. Sound like u know what ur doing good luck.

Here's a good one for you.

ING Wholesale has a program that with a 700+ score, stated and full doc are the same rate. There rates are unbeatable and you can get a 5yr ARM at around 5.75% right now (at PAR).

Now for some better news, they only require 1 day of work history if your a wage earner. For Stated they need a CPA letter showing that you've been self employed for at least 3 years. As long as you have good scores, good mortgage history and are not paying off any debt (they wont do debt consolidation) you should be good.

The down side, they only offer 5 and 7 year ARM's in full Principal and Interest. But with a rate that low you shouldn't have a problem going for it. They are also slow in underwriting but they do keep all loans in house which is really awesome.

Good Luck!

If you are planning on aking a loan with a cashflow that is not constant each month , I would suggest you take a pay option ARM where you would pay 1% or 2% interest rate.
There are new products that are coming in the market that are fixed-pay and fixed-rate pay option ARMs that have fixed-rate fixed-pay periods for 3 or 5 or 7 years.
If you think this interests you call me and ask me the details about these loans. These are called 5-yr fixed pay,fixed rate pay option loans.
My number is 954-968-1166 and email is pat@ezFirstLoan.com

I'm not a fan of the pay option arm.

The fun part is that after the balance has grown by 10% that loan is going to "recast" and your payments are going to increase substantially.

Those loans were ok even a year ago, but all of the indices that they are tied to have risen, which hardly makes the risk of an increasing payment worth the reward of the minimum monthly payment.

Seriously, why don't you just get a Home Equity Line of Credit. Only use what you need, that way you only have to repay what you use. Mortgage Brokers/LO hardly make any kind of coin from a HELOC (which is probably why no one has recommended it yet), but if you are happy with the terms of your current mortgage then I believe the HELOC is the way to go. While the prime rate is hardly attractive (8% for a couple more days) it gives you the flexibility to pull cash out as needed. Also, the fed rate hasn't been above 5.5 in a decade which means after this month, Bernake probably only has one more rate hike left in him.

If your credit is good-excellent call WAMU, Wells Fargo, B of A, or any credit union you belong to and see what they can do. It's usually prime or just below. If they're having trouble offering you something and you've got solid credit give me a call and I'll tell you what's available.

However, I doubt the cost of refinancing is necessary unless your current mortgage has terrible terms or is shortly becoming adjustable.

Sqwrl

The one that I was talking about is a 5 year fixed rate and 5 year fixed pay loan with start rate of 2%.
The regular pay option ARM has rate that increases every month and you have no control over the rates ,but the one I was talking would have a fixed rate and so fixed negative amortization . So if you have cash flow issues you would exactly be able to predict when it recasts and you can control that.
For one with a fairly steady cash flow pay option with 1% pay and monthly variable rate may not be attractive.
But a newbie in a specific field may want to take pay option ARM with payments less than 1900-00 on a 500,000-00 loan is worth considering.
The conventional first + second would come nothing less than 3000-00 .

ezFirstLoan.com
SubPrimeSpecialists.com

turns out i can't go stated because i don't have 2 yr history

someone is offering me a no doc 5/1 i/o amortized for 30; no-prepay; 7% for LTV up to 70% or 7.25% for LTV up to 75%; fmv = 700K; 1 point upfront plus 1 point ysp

how does this program sound for my situation?
rate seems okay but the 2 points (1 + 1ysp) seems high

do you think the loan officer will reduce the upfront point if asked to get the loan done? perhaps .25 or .50 pt up front plus 1 pt ysp?

I would have them do it for 1 point period.

Sounds like a simple loan. I would be firm with my request and explain to him/her that you are a realtor and look forward to building a partnership with a strong mortgage contact. The conversation should play out like this:

It's Monday afternoon around 4PM PST. The Realtor (played by you) is opening the 1st of many Sierra Nevada Pale Ales (with real beer in it) to cut through the scorching July heat. You have just singed the purchase contract on a $20 Million Dollar ranch that Clint Eastwood (played by Danny Devito) has asked you to help him purchase. After Clint signs the Contract you rip his cell phone out of his hands and call the loan officer. The conversation goes as follows:

Ring! Ring! (That’s the phone ringing in the lo's office)


LO: Home Loans done here how may I help you?
You: Do you know who this is Punk?
LO: Yes sir what can I do for you?
You: do you hear that?
LO: Hear what?
You: Do you hear that scratching sound?
LO: No, what is it?
You: that is the sound of me scratching your back, and now you scratch mine.
LO: I got it. So what do you want me to do?
You: Charge one fu+%ing point on my loan or else I'll drive to your office and kick your fu%$ing A#s.
LO: please anything you need I will get it for you. Just don’t hurt me

Ha Ha! The last 2 lines was added for dramatic effect.


Anyways this is a good opportunity to build future referral partners, and it should be handled that way. Don't make this a 1 transaction deal for you. A good LO should be able to help you a ton down the road.

LMAO! I'm dusting off my back scratcher and steel toe boots.

Yeah... NoDoc..

Hey Blue for future planing I assume you are paid 1099...

If so the way you can go full doc (On prime rate loans) is with 2 years tax returns and showing only the profit you claim. Some expenses can be added back but not many in your field.

So in the future you will want to use Stated Income Verified Assets for the best rate. 2 years is required.

Going from Salary to Self Employed is a bummer.

2 points on 400k.. Maybe you need me to do it for a flat 2000. How does that sound? Cost of living is less out here in Ohio... Kinda like TN.. lol...

Just get 2 loan officers who you feel you can trust and talk turkey about a referral relationship. Then play them against each other.

Post the deal in here and get the name of the lender and we will verify things for you.

Come to think of it this is where I would suggest an option arm..

You just started your real estate "career"..

You need a low payment.

Later when you become rich you can switch it to fully amortized...

Consider it..