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Stonebriar Mortgage

Stonebriar Mortgage

Non-Owner Occupied Loans

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Non-Owner Occupied Loans

When you live in the home that you pay a loan on, this is called an owner occupied Mortgage. Even if the property has up to four units, and you live in one, it is still considered as owner occupied.  If you have a second home that acts as a vacation home, this is also considered owner occupied.

When you apply for the mortgage, the status of your property will be set as owner occupied or non-owner occupied depending on whether you plan to live there after the loan closes. In this week’s blog post, Stonebriar Mortgage helps real estate investors learn more about non-owner occupied loans in the Dallas Texas and California markets.

Buying an Investment Property with a Non-owner Occupied Loan

Real estate is a great investment, especially if you can generate a lot of income off renting the property out. A property with up to four units where you do not plan to live on-site is considered as non-owner occupied if you plan to rent the units for income. Provide accurate information as to your plans with the property when you go to apply for the loan. If your plans change after the purchase is made, you are fine, so long as your intent was accurate at the time you applied for the mortgage.

For example, you may apply and plan to live on the property, but then you get a job transfer and must leave. This is fine, if you plan to rent out the property, you do not need to change the loan so long as your original application was accurate. You must consider whether to buy a second home in the new area or rent. For this reason, you want to shop around when approving an investment property. The expenses can add up with an investment home that is non-owner occupied, but they are usually worth the wealth gained in ownership.

Costs Associated with Non-owner Occupied Homes

Since you will rent the property out to various tenants, you need to make sure you manage your business well and follow legal procedures for renting. Here are some of the costs you may expect when running the home:

  • Costs to market the property, sign leases, and turn-over the apartments if the tenant decides to vacate (you can consider using a third-party property management company to do all of this for you).
  • Costs for utilities, trash, water, and internet or laundry—you can also look for ways to include these costs in the rent you charge or ask tenants to pay for certain things on their own.
  • Costs for legal fees to ensure you properly maintain the place, address any tenant grievances, or proceed with eviction paperwork if a tenant is breaking the lease agreement.

You can always look for ways to do things on your own and save. Stonebriar Mortgage enjoys helping clients find their second home in Dallas, Texas and California make great income from non-owner occupied loans. Contact our staff today to get started!

Second Home Loans

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Whether its to vacation in a favorite spot, find somewhere cool to spend summer, or generate investment on another property—there are many reasons to get a second home. Before you decide whether to buy a second home, it is important to weigh your options carefully. You will need to consider if you can afford another mortgage and pay for the upkeep on another home. Below is more information on what to consider and some useful tax considerations. Stonebriar Mortgage helps Dallas, TX and California homeowners learn about options for second home loans in this week’s blog.

Can You Afford a Second Home Loan?

Real estate is a great investment. Even if you are buying a second home to use as a vacation or retirement property, chances are you will not be there year-round. You may be able to generate income off renting the property or owning a timeshare. Below are some factors to consider when deciding if you can afford a second home:

  • Down payment—do you have enough saved for a down payment that will get you good financing on the property?
  • Closing costs—what will the closing costs be? Can you earn them back in rental income or afford them in your budget?
  • Monthly mortgage payment—what will the monthly payments be combined on your current and second home? What about the maintenance costs and taxes?
  • Property Insurance—don’t forget to include any homeowners or mortgage insurance you will need to buy. Some companies charge more for insurance on a second home.
  • Utilities and landscaping—even if you are not there year-round, you will need to pay for utilities and landscaping. How do you manage these things remotely?

Considering the Purpose of Your Second Home

When considering the above costs and whether you can afford them, ask yourself if this is going to be a vacation or investment property. Perhaps it is a mixture of both. The purpose of your second home will impact your taxes. If you spend more than 14 days a year at the home, or rent it for 10% of the time, it is considered a vacation home. In this case, certain items may not be deductible on your taxes, such as utilities and taxes.

If you are using the second home to generate income from rent, then you may be able to deduct items like utilities, management fees, real estate taxes, and more. If the home is a mixture of an investment and vacation property, then get ready to keep detailed records on how you use the home. Your records will be used by your accountant to determine what may be deductible.

Stonebriar Mortgage enjoys helping clients find their second home in Dallas, Texas and California, feel free to reach out with any questions you have about the process.

What Are Portfolio Loans?

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When a bank decides not to sell a loan on the market, they are keeping it in their portfolio. This is known as a portfolio loan. Banks choose to do this so that they can profit from all the interest as payments are applied. Portfolio loans may also give the company more control over the terms of their loan program. This may be helpful if you cannot qualify for a more conventional source of financing. Read on to learn more about why you want to take advantage of this program. Contact Stonebriar Mortgage for your home purchase needs in the Dallas, Texas or California market.

The Portfolio Loan Application

Check with the bank who provides the loan for their specific application process. Many banks use automated underwriting software. If you lack the traditional documents to meet the automated standards, then a manual underwriting process may be best. Show your worth as a borrower through business assets or investments. Many small banks operate portfolio loan programs to attract an entrepreneurial or investment-savvy borrower into their business. For this reason, they may offer you better rates and loan terms, so that you stay with their company and open other accounts.

Benefits of Using a Portfolio Loan

Obviously, this loan could benefit you if you cannot qualify for a traditional loan program. Many people also appreciate the more personalized customer service they get from working with a smaller bank or credit union.  In a larger bank, you may deal with an array of people over the life of the loan, and struggle to build trust.

Many investors are attracted to portfolio loans for fix and flip properties. The manual underwriting standards may adapt to their unique needs. For example, if you have a high debt-to-income ratio or an unusual credit history, the lender can still work with you.

Risks of Using a Portfolio Loan

Some portfolio loans will carry additional risk, especially if you already carry a lot of debt. The manual underwriting process could subject you to increased interest rates and fees. In addition, a higher down payment may be asked. You can always explore refinancing the loan later if you are not getting your preferred terms. Read the bank agreements closely, since many customize policies. Note if there are any sections where you are being asked to waive certain consumer rights. You should also note any penalties for taking actions such as paying off the loan early, selling at a certain point, refinancing, or more.

Whatever your decision, the friendly staff at Stonebriar Mortgage are here to help. We can discuss your interests and guide you in the portfolio loan process. We are here to support Dallas, Texas and California homebuyers.