Today we’ll check out “Supreme Lending,” a mortgage banker out of Dallas, Texas that is all about speed.
In fact, their goal is to close and fund every loan that comes in their door in 20 days or less, using the latest technology and more efficient loan processing.
This is especially important because they specialize in home purchase lending, which is often more time-sensitive than a standard mortgage refinance.
They also believe they can offer lower rates and fees than other lenders thanks to their advanced processing software and automated underwriting systems.
Additionally, their “Give Back Program” provides up to $800 in reduced closing costs to veterans, first responders, and cancer survivors, and possible discounted real estate agent fees as well.
Supreme Lending Fast Facts
A direct-to-consumer retail mortgage banker that offers home purchase and refinance loans
Founded in 1999, headquartered in Dallas, Texas (a dba of Everett Financial)
Funded $16 billion in home loans last year
About a third of their overall volume comes from home state of Texas
Licensed to do business nationwide including the District of Columbia
Has 300 physical branches and 1,800+ employees across the country
Supreme Lending is a direct-to-consumer retail mortgage banker based in Dallas, TX that was founded all the way back in 1999 by Scott Everett.
The company is actually a dba of Everett Financial, which gets its namesake from, you guessed it, their founder.
They are a home purchase-heavy lender, meaning they probably have good relationships with real estate agents and home builders too.
Nearly 75% of their overall volume consisted of purchase loans, with the remainder made up of mortgage refinance loans.
And while they’re licensed to do business nationwide, roughly a third of overall volume comes from their home state of Texas.
Supreme is also quite active in the states of California, Colorado, Florida, and Georgia.
How to Apply at Supreme Lending
You can apply online, call/email them, or meet a loan officer face-to-face
They offer a digital mortgage application powered by Ice Mortgage Technology
Allows you to complete most loan tasks electronically such as linking bank accounts or eSigning disclosures
Aim to close loans in 20 days or less by starting the closing process sooner than other lenders
To apply with Supreme Lending, you can either call them, visit a local branch, or head right to the online application on their website.
Whichever route you choose, their digital mortgage application powered by Ice Mortgage Technology (formerly Ellie Mae) allows borrowers to complete most tasks electronically.
This includes the ability to link bank accounts using your login credentials, scan/upload documents, eSign disclosures, and track loan status 24/7.
You’ll also have a dedicated, human lending team that is available to assist whenever you have questions or concerns along the way.
Supreme says it aims to close loans in 20 days or less, and is able to speed up the process by using the latest technology while starting the closing process sooner than other lenders.
Loan Programs Offered by Supreme Lending
Home purchase loans
Home renovation loans: HomeStyle and FHA 203k
Refinance loans: rate and term, cash out, and streamline
Conventional loans backed by Fannie Mae and Freddie Mac
Jumbo loans
FHA/VA/USDA loans
First-time home buyer programs
Down payment assistance
Educator Mortgage Program
Fixed-rate mortgages: 10 to 30-year terms available
Adjustable-rate mortgages: 5/1, 7/1, and 10/1 ARMs
One area where Supreme Lending really shines is their loan programs. They offer just about anything you could ask for, including purchase, renovation, and refinance loans.
You can get a first-time home buyer loan like Fannie Mae HomeReady or Freddie Mac Home Possible, or an FHA, VA, or USDA loan.
They also offer jumbo home loans, including ones with just a 10% down payment requirement, along with conventional loan offerings.
Those in the market to buy a home can take advantage of their “Lock & Look” program that allows borrower to pre-lock their mortgage rate before they find a property.
Lastly, they offer a so-called “Educator Mortgage Program,” which similar to their perks for veterans, first responders, and survivors, offers up to $1,600 in closing cost credits for teachers, librarians, secretaries, nurses, counselors, and more.
They lend on all major residential property types, including condos, second homes, and investment properties.
You can get both a fixed-rate or adjustable-rate mortgage in a variety of different loan terms.
Supreme Lending Mortgage Rates
One slight drawback to Supreme Lending is their lack of transparency regarding mortgage rates and lender fees.
They don’t appear on their website, so you’ll need to get in touch with a loan officer first to discuss loan pricing before you proceed to an application (assuming pricing matters to you).
Be sure to ask about both mortgage rates and lender fees, such as a loan origination fee, processing and underwriting fees, and so on.
Collectively, these will make up the mortgage APR, which is a more effective tool to compare loan offers than the interest rate alone.
As always, be sure to gather multiple mortgage quotes to ensure you don’t miss out on a better deal elsewhere.
Given their strong customer satisfaction numbers and the fact they’re a mortgage banker as opposed to a large bank, my guess is their pricing is pretty competitive.
Supreme Lending Reviews
Over at Zillow, Supreme Lending has a really impressive 4.97-star rating out of 5 from over 7,000 customer reviews.
The sheer number of reviews combined with the super high score shows they’ve consistently made customer satisfaction a top priority.
A lot of the reviews also indicated that rates and/or fees were lower than expected, which is a good sign in terms of loan pricing.
At LendingTree, they’ve got a similarly high 4.8-star rating from about 500 reviews, along with a 94% recommend rating.
You can also look up specific branch locations near you and find their ratings via Google if you want to see how a certain location performs.
While they aren’t an accredited business with the Better Business Bureau, they do hold a coveted ‘A+’ rating based on customer complaint history.
Supreme Lending Pros and Cons
The Good
You can apply online via a digital mortgage application
Also have hundreds of physical locations nationwide
Aim to close loans super-fast (in 20 days or less)
Tons of different loan programs to choose from
Excellent customer reviews across multiple ratings websites
Free mortgage calculators and mortgage glossary online
The Maybe Not
Do not publicize mortgage rates or lender fees
May transfer your mortgage to a third-party loan servicer after closing
Last Updated on February 25, 2022 by Mark Ferguson
Buying one rental property may not make you a ton of money right away. However, rentals can be an amazing investment when held for the long-term and when multiple properties are purchased. There is also the opportunity to buy larger commercial or multifamily properties, which can increase returns as well. With a good rental property, you should be making money every month (cash flow); you should make money as soon as you buy by getting a great deal; you will have fantastic tax advantages, you can use financing which greatly reduces the amount of cash needed; and the property value and rents will most likely go up in value over time.
Rental properties have been a great investment for me. I make more than $100,000 a year from the cash flow on my rental properties after all expenses including mortgages, property management, maintenance, and vacancies. I now have 20 rental properties which are a mix of residential and commercial. I bought my first rental property in December of 2010 for $97k. I started with residential properties but now buy almost all commercial, including a 68,000-square-foot strip mall in 2018.
You cannot buy just any property and turn it into a rental if you want to make a lot of money. You have to buy properties below market value with great cash flow to be a successful rental property owner. Not only do I make money every month from my rentals with minimal work, but my rentals have also increased my net worth thanks to buying below market value and appreciation (I don’t like to count on appreciation, but it is a nice bonus). This is not just a hypothetical article. I have owned rentals for many years, kept track of their returns, and written many articles about what I have learned.
The cool thing about real estate is while I have more than $6,000,000 worth of rental properties, it did not take millions of dollars to buy them.
Why did I choose rentals?
One of my passions is automobiles. I purchased a 1986 Porsche 928 a few years ago, and I absolutely love that car. I also have a 1999 Lamborghini Diablo, a 1981 Aston Martin V8, a 1998 Lotus Esprit Twin Turbo, and a few other cars. In my early 20s, I never thought I could afford any of these cars in my early. However, I started to make decent money as a real estate agent in my mid to late 20s. The problem was I was not saving much money. I just kept spending it. I knew if I ever wanted to get ahead in life and be able to afford these cars, I would have to invest the money I was making. I researched everything I could and decided rental properties were the best investment. I worked very hard to save money to buy my first rental.
As soon as I started buying rentals, I could see the fruits of my labor. I was making money every month from rent, I made money as soon as I bought the house because I bought it below market value, and it was forcing me to save money. I wanted to buy as many as I could, and I knew with steady money coming in every month from the rentals I could someday feel comfortable buying expensive cars.
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Why are rentals a good investment?
Not all properties are a good rental, but if you can find properties that are, they can be an amazing investment. A rental property should have a number of attributes
Cash flow
Good rentals will make money every month after paying all expenses. The expenses should include mortgage, taxes, insurance, maintenance, vacancies, and property management. The cash flow is the rent minus all of these expenses. Some people like to shoot for different numbers, but I always liked to see $400 to $500 in cash flow per property.
Buy below market
I get a great deal on every rental I buy. I don’t want to pay retail when I can pay to 20% to 30% less than retail. It is not easy to get great deals, but it is possible. On almost every house I have ever bought, I got a great deal. That instantly increases my net worth, makes me more cash flow, and looks better on my balance sheet for banks.
Leverage
You can put as little down as 20 percent when buying rentals. You can put even less down when buying a property as an owner occupant and then turning the property into a rental.
Tax advantages
Most expenses on rental properties are deductible or depreciable. You can also depreciate the structure of a rental property, which means you can save thousands of dollars each year on your taxes. You can also complete a 1031 exchange on rentals to avoid capital gains taxes.
Appreciation
Many people only talk about housing prices when comparing rentals to the stock market, but appreciation is a bonus. It is not what you are shooting for when buying a rental property because no one knows for sure if prices will go up or when.
It is not easy to find rental properties that are a good investment. It takes me months to find great deals that make over $500 a month like mine typically have, and they are not available in every market. My typical rental property used to cost between $80,000 and $130,000, and it rented for $1,200 to $1,500 a month. I put 20 percent down on the properties and finance the rest with my portfolio lender. I usually end up spending $25,000 to $35,000 in cash to buy each rental property. Cash flow is not the only benefit of rental properties. I slowly pay down the mortgage every month; I have great tax advantages; and they will most likely appreciate.
I am able to save that much cash from each rental property because I make a very good living as a real estate agent as well as from fixing and flipping houses. I like to have nice cars and a nice house, but I always make sure I am saving and investing money first. There are ways to buy rental properties with little money down, but I think you will get further ahead in life by saving as much as possible and investing wisely.
How much do you need to buy a rental?
I go over the exact cost of a rental property here, but let us assume that it costs $30,000 to purchase and repair one rental. You do not have to invest $90,000 a year to buy three rentals a year because you can begin refinancing rental properties after you own them for a year and take cash out to invest in more rentals. You can also save the cash flow from your rental properties to buy more rental properties. I usually buy my properties for about $100,000, with a four percent interest rate and 20 percent down, which leaves a payment of $381 for principal and interest. Those numbers combined with rents from $1,200 to $1,500 a month leave me with at least $500 a month in income from my rental properties.
How much should a rental property cash flow?
It is not easy to make $500 a month in cash flow from a single rental property. I detail how to calculate cash flow here, and I created a cash flow calculator to help people determine cash flow. Cash flow is not the rent minus the mortgage payment: you must consider many other factors. My rents range from $1,250 to $1,600 a month, and my mortgage payments range from $450 to $650 a month. I have to account for maintenance and vacancies on my rental properties, which leaves me with about $500 in profit each month. I buy my properties for $80,000 to $130,000 and usually make quite a few repairs before I rent them out.
What are the long-term returns for someone with little money?
Investing in rental properties can provide fantastic returns when you have a lot of money to invest. Even if you have little money, you can invest in rental properties. I am going to walk through how many years it will take someone to accumulate one million dollars from investing $7,500 a year into long-term rental properties.
The more money you make and save, the easier it is to make one million dollars from rentals. However, even people who do not make a lot of money can get there, although it may take a little longer. I am going to write out this plan assuming someone has a $75,000 salary and can save 10 percent of their income a year.
When you first start out, $7,500 does not go very far, and it takes a lot of money to buy an investment property. Luckily, there are many ways to buy a rental property with much less money if you are an owner occupant or use some of the techniques I discuss here. In the first year, the best bet is to buy a HUD home or REO that needs some work but will still qualify for an FHA or conventional loan. The key to my strategy is buying houses below market value. HUD or REO houses are a great way to do that. We will assume the investor can buy a house similar to the ones I purchase in my area, which cost around $100,000. There are closing costs that the buyer is charged when they get a loan, but you can ask the seller to pay most of your costs.
Buying as an owner occupant year one
The first step is to buy a house. But you cannot buy just any house; you want to buy a house as an owner occupant that you can later turn into a rental. You also want to get a great deal on a house to gain instant equity. To get a great deal on a house, you may have to buy one that needs some repairs. With a HUD home, you can roll $5,000 of the repairs needed into the loan with the FHA escrow and only put 3.5 percent down for the down payment. If the home needs a lot of work, you could use an FHA 203K loan to roll more repairs into the loan. We will assume this house needs $4,000 in work to qualify for a loan, and you bought a HUD home with the costs rolled into the loan. With an FHA loan, you have to pay mortgage insurance every month and an upfront mortgage insurance premium (which could be $200 or more a month).
With a conventional loan, mortgage insurance is much lower than FHA, and you might be able to remove it after two years. However, you may not be able to roll the repairs into the loan, but you could get the seller to fix some items before closing. If the repairs are cosmetic items, you should be able to get a loan without making the repairs before closing. I will assume the total cash needed to close on this hypothetical house is about $5,000. Hopefully, this house was bought below market value because it needed some repairs and was a foreclosure. Once the house is repaired, it should be worth around $125,000.
Since you bought this house as an owner-occupant, you have to live in the home for at least one year.
Year two
After one year, you have gained about $22,000 in net worth; $125,000 – $100,000 purchase price – $4,000 repairs rolled into the loan + $1,000 gained in equity pay down. In year one, no rent was collected because the home was owner-occupied to get a low down payment. In year two, the house is rented out and you can buy another owner-occupied home using the same strategy. When you try to buy a home right away, you won’t be able to count the rent from the first house as income right away. It is best to buy houses priced low enough that you can qualify for two houses at once to make this work. Otherwise, you may have to wait up to a year for the rent to count as income and can buy again.
You can only have one FHA mortgage at a time, so this time you have to get a conventional loan with 5 percent down. In the second year, you have saved up another $7,500 from your job and have $2,500 left over from the first year for a total of $11,500 saved. The second home also costs $100,000, and the seller pays 3 percent closing costs. The down payment needed is $5,000, and $5,000 in repairs are needed on this second house. The total cash needed to buy an owner-occupied home is $10,000 and the repaired value is $125,000.
The first house is rented out for $1,300 a month (which I will do all the time on a $100,000 purchase), and the payment is $550 with taxes and insurance. Add vacancy, maintenance, mortgage insurance and we’ll assume $300 a month in positive cash flow.
Year Three
In the second year, you made $25,000 from buying house number two (equity) and made $3,600 from cash flow. You also made $2,500 from equity pay down on both loans (I am assuming each loan will pay down $500 more each year). In year two, all the savings was used from year one, but you saved $7,500 and made $3,600 in cash flow for a total of $11,100 savings. Buy another house using an owner-occupied loan and use $10,000 of cash. Net worth increases to $53,100 after adding the equity pay down, cash flow and equity gained in the purchase of a new home.
The second house is rented out again using the same figures, although the mortgage insurance may be less because we are using a conventional loan instead of an FHA loan.
Year Four
Another house is bought below market value in year four. Cash flow increases to $7,200 a year plus $1,100 in previous savings and $7,500 saved this year. You now have $17,300 cash saved up before we subtract another $10,000 for the purchase of a new house as well as cash for the repairs. Net worth has increased $25,000 on the purchase plus $4,500 in equity pay down. The total net worth increase is now $90,800 for the last four years.
You own four houses and three of them are rented out. At this point, you may be able to remove the mortgage insurance on the conventional loans that have been held for two years, but I am not going to in my calculations to keep things simple and conservative.
Year Five
In year five, we repeat the entire process again and come up with the following numbers. Cash flow increases to $10,800 and previous savings $5,800 and $7,500 saved up equals $25,600 saved cash. The investor purchases another property and uses $10,000 in cash to leave $15,600 in his cash account. Net worth increases by $7,000 for equity pay down: $10,800 for cash flow and $25,000 for the purchase of a new property. The total increase in net worth is now $133,600.
You may have noticed this investor just mortgaged his fifth house. For many people, getting a loan on more than four houses is very difficult. However, the investor is buying houses as an owner occupant, which makes it much easier to get a loan.
Year Six
The same process is repeated all over again. Cash flow is $14,400, previous cash is $14,100, savings equals $7,500 for $37,500 cash minus $10,000 for a new purchase. The investor has $27,500 left in his bank account. He increases his equity pay down to $13,500, has an increase of $25,000 in net worth from a purchase, and an increase in net worth from cash flow of $14,400. He now has increased his net worth by $186,500.
Year seven
In year seven, the seventh house is purchased. Cash in the bank equals $26,000 from previous savings, $18,000 in cash flow, and $7,500 in new savings, which totals $53,000. You are now able to buy two properties this year! Buy another owner-occupied property using $10,000 and an investor-owned property.
To purchase an investment property, we need to put at least 20% down, and we still need to make repairs. We are buying below market value still, so we are going to assume we are adding $25,000 more a year in equity and $3,600 more a year in cash flow. Estimated costs for down payment and repairs is $32,000 to buy an investment property. You have $11,000 of cash left after buying two properties this year. Net worth increased by $60,500 after adding the usual amounts to total $247,000.
Year eight
Year eight is very exciting because we get to add two properties into the mix instead of just one. With the extra houses added, increased cash flow, and continued equity pay down, our net worth increased $98,200 in just one year! Total net worth is now $345,200, and you are making real progress! You have $42,200 saved up after buying another house in year eight as an owner-occupant, so you can buy another investment property, but won’t, because our margins will be too thin with only a couple thousand in savings.
Even though you are still making only $75,000 a year, you increased your net worth by almost $100,000 a year. There are not many people who can increase their net worth by more than they make in a year!
Year nine
In year nine, you are adding $26,500 in equity pay down, $28,800 in cash flow, $25,000 in built-in equity with purchases, for a total net worth increase of $80,300. Your total net worth increase over nine years is now $425,500. You also have $60,000 saved up after paying for one house as an owner occupant, which is enough to buy another investment property, leaving $26,500 cash left over!
Year ten
In year ten, you have enough cash to buy two more properties and have $28,000 in cash left over. Net worth increases by $114,500, bringing us up to a total increase of $540,000.
Year eleven
You can buy two more properties and increase your net worth by $129,200 for a total of $669,200. Cash flow is at $43,200 a year, and there is $36,700 of cash left over after buying two more properties. You could buy a third house this year but decide not to stretch your limits. You need to make sure you have plenty of reserves for the rentals.
Year twelve
This year, you buy three houses because there is $94,600 in cash available. After buying the three houses, there is $22,100 cash left in savings, equity was paid down, and $44,500 and $50,400 in cash flow was generated. Total net worth is now $814,100! You are getting closer to making one million dollars investing in real estate!
Year thirteen
You have increased your net worth by $190,200 this year because you bought three houses last year. The total net worth increase is now $1,004,300! Your actual net worth will be higher than this because I did not calculate savings from your income into the net worth, just the gain from buying rental properties. Cash flow is now $61,200 a year, and you have paid off $54,000 of equity in one year!
You own 16 rental properties which are producing over $60,000 a year! The incredible part is we did not increase the rents at all, even though they are likely to go up over thirteen years. We assumed there was no appreciation, even though there likely will be over that time. Due to the tax advantages of rentals, you are probably taking home as much in passive income from your rentals as you are from your job.
Things we did not consider
This was a very basic calculation for how to make one million dollars investing in rental properties. It would take a book to go through all the variables and possible roadblocks that might come into play. Here are a few items we did not consider, which would have an impact on the time it takes to reach one million dollars in increased net worth.
Inflation will increase the prices of homes and wages as well as rents. While the investor has to pay more for houses each year, he will also be making more and saving more. The biggest factor is the rent increases. His rent on the first houses he buys will increase as time goes on, but his payments will stay the same. His cash flow will increase greatly as time goes on, which we did not account for.
Taxes were not accounted for either because that gets very complicated. The cash flow the investor is making would be income, but the investor could offset that with depreciation from the rental properties. I assumed those two factors even themselves out.
Investment property purchases had 20 percent down, where the owner-occupant purchases had 5 percent down. There should be an increase in cash flow on the investment property purchases because of the lower down payment, but I left them the same to make the math easier.
Refinancing was not considered either, but the investor could easily have refinanced a couple of properties to get more cash out to buy more rental properties. This would have increased cash flow and net worth due to the increased number of properties purchased.
Obtaining more than 4 or more than ten mortgages can be difficult. I am assuming the investor is able to get as many loans as possible with a lender. I can have as many loans as I want with my portfolio lender, but many people cannot. This would be a roadblock once he reached ten financed properties.
Buying owner-occupied properties each year is possible but may not be realistic. Moving thirteen times in thirteen years may put a bit of stress on the family!
I also assume the investor manages his homes himself, which is doable in the beginning but it maybe tough when he gets ten homes or more.
How Did I Build a Rental Property Portfolio
I have 20 rentals now, but I did not buy them overnight. I started in 2010 and slowly bought them over the last 9 years. I bought 1 in 2010, 2 in 2011, 2 in 2012, and kept building from there. I worked very hard to make a great living as a real estate agent, but I also used real estate to buy more rentals.
I bought my first rental by refinancing my personal house and taking cash out of it. I also refinanced some of my rentals along the way so that I would have more capital to buy even more rentals. I was lucky that our market appreciated so much, but I also bought every rental property way below market value, which allowed me to take cash out when I refinanced.
I stopped buying residential rentals in 2015 because the market in Colorado became too expensive. However, I was able to invest in commercial rentals in my area and cash flow on them. There are a lot of different ways to invest in real estate!
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How much have my rentals made me?
I put together some stats to show how much rentals made me after four years of owning them. It has been a few years since then, and things have gotten even better! At the time, I had bought 11 rental properties. After doing some calculating, I discovered my rental properties have appreciated and been bought cheap enough to produce a gain of $600,000 since December of 2010! It is important to remember that net worth is all on paper, and I would not realize $600,000 in profit if I decided to sell all of my rental properties today. I would have to have selling costs, and I would have a large tax bill if I sold my rental properties.
How much equity have I built with rentals?
One thing I have done with every rental property I buy is buying them below market value. I try to buy my properties at least 20 percent below the current value, and if a home needs repairs, I want that rental property worth 20 percent more than the price I paid plus the cost of the repairs. For example; if I buy a rental for $100,000 and it needs $20,000 in work, I want it to be worth $144,000 or more when I am done repairing the home ($100,000 + $20,000 = $120,000 * .20 = $144,000). That means I usually gain at least $20,000 in net worth on every rental property I buy. The 11 rentals I have bought have gained at least $220,000 (I buy many properties at more than 20 percent below market) just by buying homes at the right price.
I also have been lucky that prices have increased significantly in Northern Colorado in the last few years. I would say lucky for the sake of calculating net worth, but the increase in prices has made it harder to buy cheap rental properties with great cash flow. If you want to know how much my houses have appreciated, I broke down each rental and how much money it has made below.
Rental 1
I bought my first rental property for $96,900 on 12/5/2010. At the time I bought it, I knew it was worth at least $125,000, which is not a huge spread between the buy price and fair market value, but the home needed less than $2,000 in repairs.
The house is now worth at least $165,000 and most likely more. I had it appraised earlier this year, and the appraisal was $165,000 and our market values have increased since that time. If the house is worth $165,000, then my net worth increased about $66,000 after you subtract the repairs. The home was rented out for 1,050 a month when I first bought it and now is rented out for $1,400 a month.
Rental 2
I bought rental property number 2 for $94,000 on 10/5/2011. This home needed much more work than number one, and I spent about $15,000 repairing the house. At the time I bought this house, I thought it was worth $140,000 after it was repaired, and this house is now worth around $175,000. That leaves me with a net worth increase of about $66,000 on this property as well.
This house has been rented to my brother-in-law since I have owned it. The rent has been steady at $1,100 the entire time but could be $1,400 to $1,500. My brother-in-law has a house under contract and will be moving soon.
Rental 3
I bought my third rental property for $92,000 on 11/21/2011. This house needed repairs, and I spent about $14,000 getting it ready to rent. At the time I bought this house, I thought it was worth $135,000 fixed up, and this house is now worth around $170,000, which creates a net worth increase of $64,000.
This home has been rented to the same tenants for $1,250 a month, but we just raised the rent this month to $1,300 a month. It would probably rent for $1,400 to $1,500 to a new tenant.
Rental 4
I bought rental property number 4 for $109,000 on 1/25/2012. This home also needed about $14,000 in repairs before it could be rented. At the time I bought this house, I thought it was worth $145,000. This house is one of my most valuable rental properties and is worth $185,000 in today’s market. That leaves a net worth gain of $62,000.
This home was rented for $1,300 up until this year when I rented it to new tenants for $1,500 a month.
Rental 5
I bought rental property number five for $88,249 on 12/14/2012, and it needed more repairs than the others. The market had definitely begun to improve at this point, and finding a home that was under $100,000 was very tough. This home was a good deal, even though it needed $18,000 in repairs. I thought it was worth around $130,000 when I bought it, and I now think it is worth $165,000. That leaves a net worth increase of $59,000.
This home has been rented to the same tenants for $1,200 a month.
Rental 6
I bought rental property number six for $115,000 on 3/7/2013. This house needed about $15,000 in repairs, and I thought the property was worth about $150,000 after it was fixed up when I bought it. It is now worth $170,000, and that leaves a net worth increase of $40,000.
This home was first rented for $1,300 a month until earlier this year it was rented for $1,400 a month.
Rental 7
I bought rental property number 7 for $113,000 on 4/18/2013. This house needed only $9,000 in repairs, and I thought it was worth $155,000 when I bought it. This neighborhood has done great, and the home is now worth $185,000, which leaves a net worth increase of $63,000.
This home has been rented for $1,400 a month since I bought it.
Rental 8
I bought rental property number 8 for 97,500 on 11/18/2013. The home needed $15,000 in repairs, and I thought it was worth $150,000 once fixed up. It is now worth $165,000, and that leaves a net worth increase of $52,000.
This home has been rented or $1,400 a month since I bought it.
Rental 9
I bought rental property number 9 for $133,000 on 2/14/2014. This home only needed $4,000 in work before it was rented, and I thought it was worth $155,000 after it was repaired. I think it is worth $165,000 now, and that leaves a net worth increase of $28,000.
This home is rented for $1,400 a month.
Rental 10
I bought rental property number 10 for $99,928 on 4/13/2014. The home only needed $3,500 in repairs before it was rented, and I thought the home was worth $125,000 when I bought it. I think it is worth about $130,000 now, leaving a net worth increase of $26,500.
This home is rented for $1,250.
Rental 11
I just bought rental property number 11 on 7/24/2014. This house will need about $15,000 in repairs, and I paid $109,318. I think this house is worth $155,000 repaired, leaving a net worth increase of $30,000.
I think this home rents for $1,400 a month.
What is the total gain?
If you add up all these numbers, my total net worth has increased by $556,500, but these numbers do not tell the entire story. I had more costs than I listed when I first bought these houses, but I did not go back through each closing file to get those exact costs. On many of these properties, I had the seller pay some closing costs, which covered much of my buying costs. I also had some carrying costs while I was getting the properties repaired and they were not rented out yet. However, I also did not include any of my cash flow or the money I made on these properties since 2010. I used all of my cash flow to pay off rental property number 1, which added up to over $70,000. That $70,000 in cash flowdefinitely covers all the closing and carrying costs I had on each property and went directly to increasing my net worth by paying off a loan. Speaking of paying down loans, I did not include the equity I have gained over the last 3.5 years by paying down my loans. I have paid down thousands of dollars of loan balances with regular payments on my rental properties.
Net worth is not money in my pocket but what I am worth on paper. Even though it is cool to see this number increase over time, this money is not all readily available. I would have to sell my rental properties to see this money, and I would not see all of it. There would be selling costs when I sell the properties and taxes owed once I sold them. Since I am using the depreciation on the rental properties to save me in taxes, I would have a higher than normal tax bill because I would have to recapture that depreciation.
What about in 2019?
I have 20 rentals that have increased my net worth about $3,000,000 in the last 9 years. I have gotten lucky that Colorado has appreciated like crazy, but they were still awesome deals even without that appreciation. They make me about $13,000 a month after all expenses. The cool part is I have spent less than $350,000 on the properties after refinancing some to take money back out. Talk about an amazing investment!
You can see all my rentals here.
My book on making money with rental properties
I provide a lot of information on my blog and YouTube channel, but I also have written six books. My book Build a Rental Property Empire has been a best-seller for years. It goes over everything I do to find, finance, repair, manage, and even sell my rentals. I also added a commercial chapter to go over that aspect as well. You can find the book on Amazon as a paperback, audiobook, and Kindle. Build a Rental Property Empire: The no-nonsense book on finding deals, financing the right way, and managing wisely.
Conclusion
It can take time to make a lot of money with rentals, but it is possible. Over the years I have bought a 1999 Lamborghini Diablo, a 1998 Lotus Esprit, a 1981 Aston Martin, and more thanks to the rental properties. The rentals have also allowed me to be aggressive with my house flipping business because I know I have that cash flow coming in every month. We flipped 26 houses last year!
Buying a home is one of life’s most rewarding milestones. However, as a prospective homebuyer, you may have noticed how much the real estate landscape has changed over the past few years.
Let’s take a look at how a temporary mortgage buydown concession could reduce your interest rate and make your initial monthly payments more affordable.
What Is a Temporary Buydown on a Mortgage?
A temporary buydown is a mortgage financing strategy that allows a homebuyer to lower their interest rate and payment for a predetermined amount of time through the payment of mortgage points at closing (whether by the lender, homebuyer or seller).
What’s a mortgage point? A mortgage point, also known as a mortgage discount point, equals 1% of your total loan amount. For example, a mortgage point on a $200,000 loan would be $2,000. When you purchase points in a mortgage buydown, you’re essentially prepaying interest upfront at closing in exchange for a lower rate, i.e., “buying it down.” Typically, a lender may offer a .25% rate reduction in exchange for one point.
How long could the rate and payment reduction last? Up to three years.
How much could the rate be reduced? A maximum of 3%. The rate is lower in the introductory period and increases over time — a maximum increase of 1% per year — to the original quoted rate.
What happens to those mortgage point payments? The money will typically go into an escrow account. Those funds temporarily subsidize your interest rate for the agreed-upon time period.
According to Scott Bridges, senior managing director of Pennymac’s consumer direct lending division, the benefit of a buydown is simple. “In short, the buydown allows a buyer to combat higher market rates,” he explains. “The first year of the loan, your rate and payment will be based on a rate that is 1% lower than the market rate. So if current rates are 6%, your first year of payments would be based on a 5% rate. That reduced rate for year one can save the average consumer several thousand dollars in payments (depending on loan amount).”
While interest rate discounts, loan terms, and conditions vary by lender, a buydown can be a good option for temporarily lowering your monthly mortgage payments at the start of your loan.
What Are the Benefits of Buying Down an Interest Rate?
There are several reasons you may want to buy down your mortgage rate. Here are a few potential budget-friendly benefits:
Lowers initial monthly mortgage payments. If you have a temporary buydown, those points you pay for upfront can make your initial mortgage payments more manageable, which can be especially helpful if you’re at the beginning of your career and expect your income to rise in the future. Those early savings will also add up to less interest paid over the life of your loan.
May boost your buying power. A reduced interest rate and the subsequent lower monthly mortgage payment may help you qualify for a higher mortgage, enabling you to purchase a more expensive home.
Can be arranged for both purchases and limited cash-out refinances. Whether you’re buying a new home or doing a limited cash-out refinance and replacing your current mortgage with a new, slightly larger mortgage, you may qualify for a temporary interest rate buydown.
Potential tax write-off. While a seller, builder, or lender may cover the buydown to facilitate a sale, the points may be deductible as home mortgage interest if you’re the buyer and pay for the buydown.1
Reduces rates for fixed-rate and adjustable-rate mortgages (ARM). You can purchase points to lower your interest rate on a fixed-rate mortgage and during an ARM’s introductory fixed-rate period. Depending on the buydown structure, rates may be reduced up to 3% for a maximum of three years.
More money in your pocket. A lower mortgage payment at the start of your loan could free up cash to pay bills or make home improvements.
Allows you to watch the market. A buydown gives you an opportunity to watch the market while saving on your monthly payments. “As rates move up and down during and after that first year, you can refinance into a lower rate with the knowledge you had a full year of reduced mortgage payments,” Bridges notes.
How Much Does It Cost to Buy Down the Interest Rate?
Generally speaking, the approximate cost for a temporary mortgage buydown equals how much you’ll ultimately save in interest. But several factors will be taken into account:
How much money you’re borrowing
How many points you’re buying; each point costs 1% of the mortgage amount
Type of buydown structure
Who funds a temporary mortgage buydown? In most cases, the buyer will pay the mortgage points, but in some instances, the buydown could be fully or partially funded by the seller, lender, or third party, such as a realtor or builder.
How long will the reduced interest rate be in effect? The lower rate and payment will be in effect for up to three years, depending on the rate buydown structure. Below are a few different types of mortgage buydowns.
Rate Buydown Structures
There are several types of rate buydown structures. If your lender offers you a buydown — most, but not all, lenders do — you will have the opportunity to negotiate pricing and determine which structure suits your financial needs. The following are the most common types of temporary mortgage buydown structures.
3-2-1 Buydown
A 3-2-1 buydown is a home financing arrangement that will reduce a homebuyer’s interest rate for the initial three years. The lowest interest rate is in the first year, increasing to the permanent quoted rate after the third year.
3-2-1 Buydown Basics
Reduces rate by three percentage points in the first year of the mortgage
Reduces rate by two percentage points in the second year
Reduces rate by one percentage point in the third year
Borrower pays full interest rate after the completion of the third year and is fixed for the remainder of the loan
3-2-1 Buydown Example
This chart shows how a 3-2-1 rate buydown could potentially work if you were to qualify for a 30-year, $200,000 mortgage at a rate of 7%:
Mortgage Year
Interest Rate
Monthly Payment (Principal and Interest)
Monthly Savings
Annual Savings
1
4%
$954.83
$375.77
$4,509.24
2
5%
$1,073.64
$256.96
$3,083.52
3
6%
$1,199.10
$131.50
$1,578
4 – 30
7%
$1,330.60
$0
$0
In this scenario, the total buydown cost would be approximately $9,171, the amount equal to the first three years of interest savings. The chart amounts don’t include insurance or taxes, and you will want to assume no points contribution from the seller, builder, lender, or a third party.
2-1 Buydown
A 2-1 buydown is a type of home financing arrangement that reduces the interest rate on a mortgage for the first two years, after which the rate rises to the permanent quoted rate.
2-1 Buydown Basics
Reduces rate by two percentage points in the first year of the mortgage
Reduces rate by one percentage point in the second year
Borrower pays full interest rate after the completion of the third year for the remainder of the loan
2-1 Buydown Example
This chart shows how a 2-1 rate buydown could potentially work if you were to qualify for a 30-year, $200,000 mortgage at a rate of 7%:
Mortgage Year
Interest Rate
Monthly Payment (Principal and Interest)
Monthly Savings
Annual Savings
1
5%
$1,073.64
$256.96
$3,083.52
2
6%
$1,199.10
$131.50
$1,578
3 – 30
7%
$1,330.60
$0
$0
In this scenario, the total cost of the buydown would be approximately $4,661.52, the amount equal to the first two years of interest savings. The chart amounts don’t include insurance or taxes, and assume no points contribution from the seller, builder, lender, or a third party.
1-0 Buydown
A 1-0 buydown is a type of home financing arrangement that reduces the mortgage interest rate by 1% in the first year, increasing to the permanent quoted rate after that initial year.
1-0 Buydown Basics
Reduces rate by one percentage point in the first year of the mortgage
Borrower pays full interest rate after the completion of the first year for the remainder of the loan
1-0 Buydown Example
This chart shows how a 1-0 rate buydown could potentially work if you were to qualify for a 30-year $200,000 mortgage at a rate of 7%:
Mortgage Year
Interest Rate
Monthly Payment (Principal and Interest)
Monthly Savings
Annual Savings
1
6%
$1,199.10
$131.50
$1,578.00
2 – 30
7%
$1,330.60
$0
$0
In this scenario, the total cost of the buydown would be approximately $1,578, the amount equal to the first year of interest savings. The chart amounts don’t include insurance or taxes and assume no points contribution from the seller, builder, lender, or a third party.
Who Can Buy Down a Mortgage?
In most cases, the buyer will buy down the mortgage, but there are times when the seller, builder, or lender will offer to purchase points and pay for the buyer’s mortgage buydown. Let’s take a look at each scenario.
Buyer-Funded Buydown
When a buyer negotiates a buydown with a lender, they pay a certain amount of points upfront at closing in exchange for a reduced interest rate. Depending on the buydown structure, the rate could be temporarily lowered for up to three years or the entire loan term. Most mortgage buydowns are buyer-lender arrangements.
Seller-Funded Buydown
A seller-funded buydown is when a highly motivated seller purchases points and buys down the homebuyer’s interest rate. This seller concession can help “seal a deal” by incentivizing and speeding up a home sale. Subsidizing a mortgage buydown can:
Give a seller a competitive advantage without having to lower the listing price
Help increase the borrower’s purchasing power
Make it easier for buyers to qualify for financing
Expedite the home sale process
A possible win-win for both the seller and the buyer. The seller could make a faster sale while holding on to more profits than they would if they lowered the asking price. The buyer saves money with a lower interest rate.
Builder-Funded Buydown
Homebuilders can offer mortgage buydowns to attract prospective homebuyers. As interest rates climb and the new-home market slows, builder buydowns are becoming an increasingly popular selling strategy. A recent survey found that 75% of nationally surveyed home builders confirmed they are buying down buyers’ mortgage rates to make payments more affordable.2 Builder buydowns can:
Lure buyers in a competitive and high mortgage market
Make new homes more affordable to a broader range of buyers
Be offered as part of a package, such as an upgrade or closing cost contribution
A builder buydown arrangement may require the buyer to go through the builder’s mortgage company for the mortgage.
Lender-Funded Buydown
Lenders may offer to subsidize a buydown by contributing all or some of the funds for the mortgage points. This concession option could help increase your negotiating and purchasing power as a borrower.
Is Buying Down an Interest Rate Right for You?
A temporary lower interest rate is certainly enticing, but mortgage buydowns aren’t for everyone. Buying mortgage points in exchange for a rate reduction may not be in your best interest if you are…
Having trouble meeting loan qualification criteria: You must qualify for the standard loan terms without the benefit of the buydown. This also includes:
Having a minimum 660 FICO score
Meeting the applicable Fannie Mae requirements
Submitting mandatory documentation
Purchasing an investment property or manufactured home: A mortgage buydown can be arranged for a principal, owner-occupied home, or a second home. It’s not available for investment properties or manufactured homes.
Planning on selling soon: There are substantial upfront costs involved with buying a new home, including the down payment and closing costs. Add mortgage points to the mix and it will take time to “break even,” meaning the time it will take for your savings to outweigh those costs to lower your interest rate. If you sell in the near future, you may not have been in the home long enough to recoup those point costs.
Doing a regular cash-out refinance: Mortgage buydowns are allowed on purchases and limited cash-out refinances only. Limited cash-out refinances follow Fannie Mae guidelines restricting the cash-back amount to $2,000 or 2% of the new loan principal balance, whichever is less.3
Short on cash: If you have limited cash, the high upfront costs may deplete your savings, leaving you short on funds you may need to cover other future expenses. Instead of buying points, you may want to allocate those funds to paying down high-interest debt or building an emergency fund.
Making a small down payment: If you’re purchasing a home and contributing less than 20% to the down payment, or if you’re refinancing and have less than 20% equity, you’ll likely have to pay for private mortgage insurance (PMI) on your conventional loan.4 The premium will be added to your regular monthly payment. Rather than pay for points, consider using that money to make a larger down payment.
When can a mortgage buydown make sense? This home loan strategy is worth exploring if…
You have enough liquid cash: If your savings is enough to cover the down payment, closing costs, and mortgage points — and you have a cash reserve left over — a temporary mortgage buydown can be a great option for reducing your interest rate for up to three years.
You expect your income to rise: Starting your career? Re-entering the workforce? If you anticipate that your income will rise within the next few years, a temporary mortgage buydown can help you ease into homeownership with a lower initial interest rate and payment.
The seller, builder, or lender is paying for the points: If you’re a homebuyer and the seller, builder, or lender offers to purchase the mortgage points for you, a temporary buydown can be an easy way to save money without any point-related, out-of-pocket expenses.
“Lots of people avoid buying a home when rates are higher,” says Bridges, “but this program allows you to at least achieve some reduced payments and real savings for a year.”
Higher rates can also significantly slow down home buying demand. That means, Bridges adds, “You will likely pay less for the house than you would in a low rate market when multiple buyers tend to bid over asking.” With a buydown, you set yourself up to win on multiple fronts. “You get a deal on the house you want, save money on the purchase price of the home in this higher rate market, save money on the monthly payment in year one, and refinance when rates drop.”
The Permanent Mortgage Rate Buydown Option
Want to lower your interest rate and monthly mortgage payment for your entire loan term? In addition to a temporary buydown, you may be eligible to negotiate a permanent buydown with your lender.
Protects against rate hikes. The lower rate will never increase during the loan term as long as you have a fixed-rate mortgage.
How much does it cost? The rate typically costs between six and eight points. Costs are added to the closing fees.
Ready to learn more about how Pennymac can help you find the right home loan? Begin your online application now, and if you still have questions, contact a Pennymac Loan Expert. We’ll help you evaluate your mortgage buydown options and decide the best course of action for your unique situation.
Hard money is used by many investors as a short-term solution to fund real estate deals. Hard money can be used to fund fix and flips or buy rental properties until long-term financing can be put in place. I fix and flip homes as well as invest in long-term rentals, but personally, do not use hard money. When you use hard money it is usually more expensive than traditional financing and I have other short-term financing in place. Hard money is still a great option for many investors, but I will also discuss other short-term financing options. There is also a way to use hard money or private money to buy rentals with no money down using a conventional loan refinance.
What is a hard money loan?
Hard money is a type of financing used to finance properties for a very short-term like 6 months or a year. Hard money-lenders use different terms than a traditional bank. The first thing you will notice when you finance with hard money lenders is they charge a very high-interest rate. Most hard money-lenders are charging 10 to 16 percent and points for their money. Points are a percentage of the total loan and can add costs quickly when a hard money-lender is charging 2, 3 or even 4 points on a loan. Hard money loans are typically used for fix and flips because they usually have a one year term.
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Why would investors use hard money to finance a rental property?
The advantage of a hard money-lender is they may loan the entire amount of money you will need to complete a deal. Most hard money lenders base the amount of the loan on the after repaired value or ARV. You may hear they will loan 65 or 70 percent of ARV; that is not the purchase price, that is how much the house will be worth once you fix up the home. With a hard money loan, a rental property could be financed with much less money down.
How can a hard money loan be refinanced on a rental property with no money down?
Here is an example of how one hard money-lender structures a deal. You buy a home for $60,000, the ARV is $130,000 and the lender says they will go up to 70 percent ARV on the property. The hard money-lender will loan up to $91,000 on the house based on the ARV. The hard money-lender will need bids or estimates for repairs, and they will pay out the money for the repairs like a construction loan. They will pay 25% of the repairs needed at closing, and the other payment will come in 25 percent increments as the repairs are completed. The lender won’t charge you any interest or points until you sell the home and then you pay them one large payment for the loan principal, interest and points. This particular hard money-lender charges 15% interest and 4 points, but they will reduce the points paid after you do a few deals with them.
The cost to do this deal with a hard money-lender can add up very quickly. On this deal, the interest will cost you $6,825, and the points will cost you $3,640 if you use the money for 6 months. There are also hard money-lenders that will charge lower interest and points but will want a split of your profits. I don’t use hard money-lenders myself, because of how much they charge, but for investors who have no other options it can work out well. Hard money-lenders can help you secure a property below market value when you do not have other options.
Where can you find hard money-lenders?
There are many hard money-lenders out there. Many only lend in specific states, while some lend nationwide. The best way to find a hard money-lender is to search for one in your state on any search engine. If you want a few companies to talk to, I have listed some hard money-lenders below.
Lima Capital Hard Money
Fund that Flip
Can you refinance a private money loan on a rental with no money down?
Private money is money that comes from a private person. The person loaning the money is not a bank, mortgage company, hard money-lender or portfolio lender, they are just a person. Regular people will lend money on real estate because interest rates on other secured investments are really, really low now. Have you looked at what the rate is on a CD? For a five-year CD, the average is less than 1 percent! You can’t even come close to keeping up with inflation with that rate. Many wealthy people are looking for a higher yield investment that is still secured. Loaning on real estate may be the perfect answer for them to increase returns and create great opportunities for investors. A private money loan can be used in the same way a hard money loan is used.
How do you find private money for a rental property?
The biggest problem with private money is finding the person to lend you private money! There are many websites that claim to have private money lenders they can connect you with for a small fee. In my experience, those websites take your money and connect you with a hard money-lender at best. A real private money-lender wants to lend their money to someone they know and trust. They don’t want to lend money to a complete stranger who may or may not be trustworthy and do not have a clue what they are doing. I am still trying to find a source for good private lenders, but I think I am limited to one option; people I know. I use private money from many sources who want a better return on their money.
How to buy a rental property with no money down using hard money
It is possible to buy a rental property with no money down using hard money. If you were to finance with a hard money loan and finance repairs as well, you can refinance the hard money loan with no seasoning period according to Fannie guidelines. Fannie guidelines do not allow a cash-out refinance without a seasoning period, but the home has a higher loan than the original purchase price because the repairs were financed. You can get a long-term loan to replace the hard money loan without waiting a year like you would with a cash-out refinance.
For example, if you buy a home for $100,000 with hard-money loaning 100 percent of the purchase price and financing $35,000 in repairs. The total loan is now $135,000, you fix up the home and refinance using a Fannie loan, which will loan up to 75 percent of the new appraised value. If the appraisal comes in at $185,000 then you could finance up to $138,750, but Fannie guidelines will not allow a cash-out refinance. You would be able to refinance the full $135,000 that was loaned to you by the hard-money lender. This technique can be rather expensive because you have to pay the higher interest rate on the hard-money loan, the initial points and then the refinance costs with Fannie Mae. However, you just bought a long-term rental and fixed it up with almost no out-of-pocket costs!
Using traditional banks to finance short-term loans on rental properties
There are some banks who do short-term loans for investors. They are very hard to find and usually, you must have a great relationship with the bank. We use a portfolio lender to finance many of our short-term investments. They charge around 5.25 percent interest and 1.5 points on our loans. They will only give us 75 percent loan to value on our original purchase price and can complete the loan in two weeks. In the past, banks would finance 100 percent loan to value and fund us the same day. I am afraid those days are gone forever.
Traditional banks can offer another short-term option in the form of lines of credit. Most banks will want collateral in the form of real estate to issue a line of credit. If you have a house with equity in it, you should be able to get a line of credit from your bank. My bank charges a 5 percent interest rate and will go up to 90 percent loan to value on my personal residence or 80 percent on an investment property.
Conclusion
I use a mix of traditional banks, lines of credit and private money to fund my deals. I am lucky that I have private money available and cash to complete a lot of deals. I will usually get the bank loan for 75 percent of the purchase price, use private money for the rest of the down payment and my own money for repairs. Don’t be afraid to finance real estate with hard money if that is your only option.
Today we’ll check out tech-minded lender “GO Mortgage,” which is a dba of GSF Mortgage Corporation.
While GO is only a few short years old, its parent company GSF has been around since 1995. And its founders have been in the mortgage biz since the 1970s.
So clearly there’s a strong pedigree here, and the combination of the latest technology coupled with old-fashioned customer service could be a win for consumers.
Let’s learn more about GO Mortgage to determine if it could be a go-to spot for your home loan needs.
GO Mortgage Fast Facts
Independent direct-to-consumer mortgage lender
A dba of parent company GSF Mortgage Corp.
Founded in 2018, headquartered in Brookfield, Wisconsin
Offers home purchase loans, refinances, and construction loans
Currently licensed in 36 states nationwide
Funded roughly $1.3 billion in home loans last year
GO Mortgage is an independent, direct-to-consumer mortgage lender that offers home purchase financing, refinances, and construction loans.
The company was founded in 2018 and is headquartered in Brookfield, Wisconsin, the state where they do the bulk of their business.
In fact, nearly 25% of total loan volume came from the Badger State, though they’re also quite active in Texas, Florida, North Carolina, and Virginia.
Overall, they managed to fund about $1.3 billion in home loans last year, with about half of that coming from refinance transactions, a third from home purchases, and the rest home improvement.
Currently, they work remotely with customers in 36 states nationwide as they don’t appear to have physical branches.
They aren’t available in Alaska, Connecticut, Hawaii, Massachusetts, Montana, Nebraska, New Hampshire, New Mexico, New York, North Dakota, Rhode Island, Vermont, West Virginia, or Wyoming.
How to Apply with GO Mortgage
Their ‘On the GO’ digital app is powered by fintech company SimpleNexus
Allows customers to apply for a mortgage from any device in just minutes
Ability to link financial accounts, securely scan/upload docs, and eSign disclosures
Use the borrower portal to check your progress and receive status updates along the way
To get started, simply navigate to the GO Mortgage website and hit “Get Rates.” Or simply call them up directly to get connected with a loan officer.
If you already know who you’ll be working with, you can search by name once you click “Find an Advisor.”
Those who are ready to go can click “Apply Now” and begin filling out the digital application powered by SimpleNexus.
There’s also a smartphone app called “On the GO” if you prefer to manage your mortgage experience from your mobile device.
Once in the app, it’s possible to link financial accounts, securely scan and upload docs from your phone, and message your loan officer instantly when you have questions.
You’ll also get updates as you go and there’s an online borrower portal where you can check your loan status.
If you’re looking to get pre-approved for a mortgage, they say you can do so in about 24 hours.
They appear to employ the latest tech, but also have dedicated loan officers and processors standing by to help when needed.
Loan Programs Available at GO Mortgage
Home purchase loans
Home renovation loans
Refinance loans: rate and term, cash out, and streamline
Conventional mortgages
Jumbo loans
FHA/VA/USDA loans
Single-close construction loans
Go Mortgage has a fairly extensive product menu, offering anything from a home purchase loan to a mortgage refinance to a renovation or construction loan.
You can also get your hands on any major type of loan, whether it’s a conventional loan backed by Fannie Mae, a jumbo loan, or a USDA loan.
They seem to specialize in single-close construction loans, with options for all major loan types including Fannie Mae, FHA, VA, and USDA.
Both fixed-rate and adjustable-rate mortgages are available in a variety of loan terms, including options like the 15-year fixed and 5/1 ARM.
GO Mortgage Rates
While GO Mortgage says many of its customers choose them for their low rates, they don’t feature on their homepage or elsewhere on their website.
As such, you’ll either need to fill out their mortgage rate quote form online, or simply call them up to get connected with a licensed loan officer.
I was able to find at least one loan advisor that listed sample daily mortgage rates on his personal webpage, but most did not.
From what I did see, the mortgage rates were definitely competitive, but it will depend on the loan scenario.
In terms of lender fees, I couldn’t find any information regarding a possible loan origination fee, processing, underwriting, etc.
So be sure to take the time to speak with someone first to get all those details, then shop around accordingly.
My assumption is they’re competitively priced with other nonbank, direct lenders, which might put them ahead of big banks, but perhaps not the absolute lowest out there.
But again, you’ll need to get in touch with a human to find out.
GO Mortgage Reviews
One thing Go Mortgage isn’t short on is excellent reviews.
On Experience.com, they’ve got a 4.79-star rating out of 5 from more than 7,000 customer reviews.
Be sure to check out individual loan officer reviews as well if you want to fine-tune your search and work with someone truly exceptional.
Over at Zillow, GO Mortgage has a stellar 4.88-star rating out of 5 from about 1,000 customer reviews.
They also have an equally strong 4.9-star rating on Bankrate, and a 4.7-star rating on Google from about 250 reviews. The company is an accredited business with the Better Business Bureau, and currently holds an ‘A+’ rating with the BBB based on complaint history.
To sum things up, GO Mortgage appears to be a popular choice for both home buyers and those looking to refinance.
And as noted, they specialize in one-time construction loans, so they could be a good option if you’re building a home.
GO Mortgage Pros and Cons
The Pros
A paperless, digital mortgage loan process
Can apply online or via smartphone in minutes
Lots of loan programs to choose from
Specialize in one-time close construction loans
Excellent customer reviews across all ratings sites
Mike and Georgia had looked for six months before they found their perfect townhome. Like many buyers, they were more worried about the sellers accepting their offer than they were about investigating the Homeowners Association (HOA). Turns out, the HOA almost ruined the deal. Because the HOA had let their FHA approval lapse, Mike and Georgia were not able to go with an FHA loan. When they switched to a conventional loan, they had to drain their savings in order to qualify for the higher debt-to-income ratios. At this point, they took a more careful look at the HOA’s meeting notes and were alarmed to read that roads would soon need major investments and that HOA fees had been rising higher and faster than local rents for the past five years. The entire scenario was a nightmare, costing Mike extra time and money—and he now gets to pay the association a pretty penny every month for the hassle.
HOAs aren’t usually top of mind when you’re looking to buy a home. In fact, HOAs can be completely overlooked until you learn that your dream house comes with one.
If you’ve carefully figured out just what you can afford to spend every month on a mortgage and then get hit with the added expense of an HOA, you may find your perfect home suddenly out of reach. But all the HOA news isn’t bad. Sometimes the benefits of an association can make homeownership more manageable—especially if you’re used to apartment or condo living.
Whether an HOA is part of your home shopping wish list or not, here’s everything you need to know to make a smart decision when it comes to joining an HOA.
What is an HOA and why do they exist?
One Salt Lake buyer, Kip. A., shared this insight, “HOAs are meant to ensure that a community maintains a good standard of upkeep and generally do a good job at that. Some HOAs might include lawn care, snow removal, and community amenities such as a clubhouse or pool.”
Homeowner associations are legal entities that exist to govern a planned community like a subdivision or apartment complex. HOAs ensure that certain rules and regulations (like what color you can paint your front door) are followed, and usually take responsibility for maintaining common areas like parking and sidewalks. An HOA will typically take care of at least some of the landscaping and exterior home maintenance.
As Kip noted, they can also provide community amenities like a pool, fitness center, and park areas. In some instances, HOAs provide road and waste management to areas that are outside city service areas. HOAs are funded by membership fees that are required to live on the property. Fees can range from $75 to more than $400 per month, depending on the neighborhood and the services provided.
Things to watch out for when it comes to an HOA
If you fall in love with a home that has an HOA, this is your must-do list before putting in an offer.
Dig into the fees: Find out what the current fees are, what they cover, and how often you can expect increases. Most HOAs in Utah have some limits on how much fees can be increased without homeowner approval. However, the board can usually approve a minimal increase without asking for input or taking a homeowner vote.
Verify what your fee covers: Be very specific when you look into what your HOA fee covers and what it doesn’t. If landscaping is included, find out the specifics—how often is the lawn mowed and edged? Is tree and hedge trimming included? What if you have a broken sprinkler? Verify policies for snow removal, waste and recycling, and which portions of your home are covered for repair under the HOA’s homeowners insurance policy.
Ask about big projects: HOAs need to maintain things like roofs, fences, and community amenities like swimming pools. Find out if any big projects are on the horizon and what the costs look like. Sometimes HOAs will impose a special assessment on top of your monthly fees in order to pay for something big like re-tiling the pool.
Read the minutes: HOA meeting minutes are public and available to all homeowners. Ask to review recent minutes, which should include the latest financials. Look for any complaints that seem consistent and note outstanding HOA fees from owners who are in arrears. The minutes should also include how much money is currently in the reserve account for emergencies and big projects. This can give you a clue into the health of the community and the potential for extra fees and increases.
Study the CC&Rs: The HOA governs the CC&Rs (Covenants, Conditions, & Restrictions) of the community. These are the rules that let homeowners know what modifications are allowed (painting, shutters, etc.) and what is not allowed. Some communities have liberal policies and others are highly restrictive, not even allowing wreaths on front doors or more than one small pet. Owners are fined if they violate the CC&Rs, so it’s highly important to understand what they are and whether or not you can live with them.
Life with an HOA… advice from Homie buyers and sellers
Many Homie buyers and sellers have lived with HOAs—and some have passed on a house because of the HOA—and wanted to share their experiences to help other home buyers.
Rob T. warns homeowners of the costs of an HOA over time, “Make sure that you understand the long-term costs of an HOA and consider if they are providing value equal to that cost. Since you are paying them monthly, make sure they doing their job. HOA‘s can be hit or miss. Some provide great value while others create huge hassles. Where possible, check with current residents in the area to see what they say about their HOA before you buy.”
Justin P. shared why he likes his HOA, “I like having an HOA to protect my property value from gross negligence or outrageous and inconsiderate decisions by neighbors.” However, he added this advice, “Read the CC&Rs to know what restrictions you may have as a homeowner, but judge the HOA’s ability to protect your property value by browsing the existing neighborhood to see how well kept it is.”
Clinton M. cautions potential buyers about possible fines and liens, “When purchasing a home in an HOA neighborhood, be well aware of the fact that your neighbors will be on the lookout for any infractions and are willing to turn you in (subjecting you to fines) for any violations. Be advised that your failure to pay your dues will result in a lien against your property and you can be foreclosed upon by your community. Not surprisingly, the community interest is at stake – if the HOA bankrupts, it goes on your credit too! The best advice I could give to any family or friend would be to think twice about purchasing in an HOA community.”
Homeownership is exciting, and it’s important to feel confident and comfortable about the community in which you buy. If an HOA is part of the package, be sure to do your research first. It’s nearly impossible to get out of HOA requirements and restrictions, and if you’re not happy with how yours is run, you could be in for a world of headaches, extra fees, and disappointment.
Pay Private Mortgage Insurance (PMI) or play the wait-and-save game? That’s the dilemma for a majority of would-be homebuyers. It’s rarely an easy (or fun) choice.
The Dilemma
Coming up with a 20% down payment can take years. With home prices increasing 5-10% annually, the home of your dreams is sure to cost quite a bit more in 2026. Rather than save, some homebuyers opt to pay PMI instead. Most future homeowners don’t know what PMI is and how much it may cost them.
What’s the Purpose of PMI?
Usually you purchase insurance to protect yourself. PMI works differently: basically you pay to protect the mortgage lender in the event you can’t pay the mortgage. It’s basically a mortgage lender’s insurance to protect themselves if a borrower stops making payments.
In general, mortgage lenders consider buyers who put at least 20% down to have enough skin in the game that they’re low risk. That makes everyone that puts down less than 20% a riskier investment, so they require them to pay PMI.
The Upside of PMI
The good news about PMI is that it’s not too expensive and you don’t pay it forever. Your lender typically requires you to pay PMI until you get to a Loan-to-Value (LTV) ratio of 80% loan to 20% equity. Once you do, you can request your PMI be cancelled, unless you’ve taken out a FHA loan (PMI never falls off when you choose this loan type). PMI also doesn’t cost too much, although the amount you pay can vary. Below are a few ways to lower your payment.
Commonly Asked PMI Questions
How much will I pay in PMI?
Homebuyers required to pay PMI typically pay around 0.5% annually of the total amount borrowed, with the cost split across all 12 months. Here’s some examples:
$180,000 loan ($200,000 with 10% down), PMI $75/mo
$285,000 loan ($300,000 loan with 5% down), PMI $125/mo
When will I be done paying PMI?
This depends on what type of loan you take out. Here’s a quick guide:
FHA: If you take out an FHA loan, mortgage insurance continues for the life of the loan. Ouch. You’d have to refinance your loan to get rid of it.
Conventional: On a conventional loan you only pay PMI until your equity reaches 20%.
How can I avoid paying PMI entirely?
Your house is probably your biggest expense, and the thought of spending extra money each month is as appealing as week-old sushi. Do you have to pay PMI? No, not if you do any of the following:
Put 20% down. Call the parents, check in with Grandma, collect every debt from your former roommates. When you put 20% down, you don’t pay PMI at all.
Opt for an 80-20 piggyback loan. 80-20 mortgage is paid through two loans, a first and a second mortgage. The 80 first mortgage covers the home loan; the 20 second mortgage is the down payment. The second loan in a piggyback loan usually has a higher interest rate.
Look for owner financing. In some situations, owner financing works like rent-to-own, in which case you probably won’t be required to pay 20% down or PMI.
Shop for homes at a lower price point. Consider the difference in down payment for a $250,000 home versus a $300,000 home: (we’ll save you the math: it’s $10,000). Lower price homes may fit your savings account better—and you can trade up or add on later.
Check out Homie Loans™. Homie Loans™ can look at your personal financial situation and tell how you can lower your PMI. Homie Loans™ may be able to help you with a new loan.
To Pay or Not to Pay? The Decision is Yours
No one wants to pay extra each month for their home, but if paying PMI means you can buy a $300,000 home now vs. waiting five years while you save, paying a few thousand in PMI over that same period can make a lot of financial sense. Plus, the $300,000 home you purchase now starts building equity ASAP and will likely increase in value each year you live there.
We’re Here to Help
There’s a lot to consider when choosing to pay PMI vs. wait and save for a 20% down payment, but we hope we’ve given some helpful tips to guide you in the right direction. If you have any additional questions, or would like to begin the home buying process, click here to learn more about how to get started. We’d be happy to help you start your search for your dream home!
VA loans are exclusive to veterans, active military personnel and their families. It’s a government-backed loan program designed to make homeownership more affordable for these individuals by offering flexible financing options with competitive interest rates. Additionally, VA loans do not require any down payment or private mortgage insurance (PMI). These loans serve as an important tool to help those who have served our country gain access to their dream of homeownership.
If you are an active-duty military personnel or a veteran, there are many VA loan lenders out there, including New American Funding. The company offers lower interest rate mortgages with excellent terms exclusive to service members and military spouses.
Read on for our review of New American’s VA loan offerings.
Best for Low-Credit Borrowers
New American Funding provides a range of benefits that make homeownership more accessible to U.S. service members, veterans and their spouses. As with all other VA loan programs, New American doesn’t require a down payment, and interest rates are usually lower than those of mortgages not guaranteed by the government. Credit score requirements are not published on New American’s website, but they do mention on their blog that VA loans are a good option for “buyers with less-than-perfect credit.”
Additionally, New American Funding doesn’t require any monthly mortgage insurance payments and has no prepayment penalty, meaning borrowers can refinance or sell without having to pay additional fees.
New American VA Loans Pros and Cons
Good for borrowers with challenged credit
Focuses on lending to minority groups
High BBB rating
Offers a closing guarantee
APR information and interest rates are not publicly accessible
Unavailable in Hawaii
Pros explained
An option for borrowers with challenged credit
New American Funding’s VA loan is ideal for service members and veterans looking to become homeowners without needing perfect credit or a large down payment. Even with a credit score of around 580, you can access a wide range of mortgage loans and low-interest VA loan rates. VA loans also come with a funding fee, which is a percentage of the loan amount that goes toward funding the VA Home Loan program. This fee helps VA lenders to take on customers with lower credit and no or low down payments.
Additionally, New American’s VA loan allows you to sell or refinance your home at any time with no penalty or restrictions on cash-out refinances, unlike conventional or FHA loans, which require you to have 20% equity left over after the refinance.
Heavy focus on lending to minority groups
New American Funding is committed to offering clients from all backgrounds a variety of mortgage products and services. Being the nation’s largest home loan company founded by a Latina, New American Funding is dedicated to hiring Hispanic personnel and helping minority groups.
This company lends with an emphasis on social responsibility, as special attention is paid to minority groups whose access to financing may be limited by traditional lenders. New American Funding also brings mortgage education to underserved communities and works with them to overcome income, credit score and race-based barriers to attain home loans. This includes the company’s Latino Focus initiative, which works to improve the experience of Hispanic clients when obtaining a home loan and its New American Dream initiative, which seeks to increase homeownership in African American communities.
As part of the company’s commitment to serving all communities, New American Funding offers FHA, VA and USDA loans designed specifically for first-time homebuyers. It also offers options for adjustable-rate mortgages, fixed-rate mortgages, jumbo loans and more.
BBB accredited with an A+ rating
The company has accreditation and an A+ rating from the Better Business Bureau. This is an indication that it meets all of the BBB’s high standards for operating with integrity and fairness. New American Funding maintains a 4.04 out of 5 stars from 606 customer ratings on BBB with an overwhelming number of customers giving the company a full 5-star rating.
Many of the negative reviews seem to be related to customers not being approved for a loan rather than issues with customer service. Even for these reviews, the company is quick to respond in a respectful and helpful manner.
Offers a closing guarantee
This guarantee is available for all VA mortgages processed with New American Funding. The borrower will receive a full refund of their loan origination fee if the loan fails to close within the specified timeline.
Cons explained
APR information and interest rates not publicly available
New American Funding does not provide publicly available information about its APR or interest rates. To get an accurate estimate on the cost of a loan, you must provide contact information for a quote.
Not available in Hawaii
New American Funding is not available in Hawaii. This means that military families seeking a mortgage loan in this state won’t be able to take advantage of the company’s services.
New American VA Loans Offerings
New American offers a wide range of VA Loans, including 30-year fixed-rate and adjustable mortgages. Below, we explore the types of mortgage loans offered at New American Funding to help you identify which loan is right for you.
VA streamline refinance loan
Also known as the Interest Rate Reduction Refinance Loan (IRRRL), the Streamline Refinance Loan provides an opportunity for veterans and active military members currently carrying VA home loans to take advantage of lower interest rates, reduce mortgage payments and increase overall savings.
If your home has increased in value or you owe less than 80% of its worth, you can refinance. Additionally, a VA Streamline Refinance loan can be done with no money out of pocket. This means you can cover all of the upfront costs of refinancing by rolling them into the total loan amount or adjusting the interest rate.
The IRRRL can also be used to refinance your mortgage from a fixed-rate loan to an adjustable-rate loan, from one type of adjustable-rate loan to another or to convert a non-VA loan into a VA loan.
The table below shows the typical refinance costs.
Refinancing requirements:
Average cost
Loan discount points
0 to 3% of your home loan amount
Appraisal fee
$300 – $500 (could be more for larger homes)
Inspection fee
$175 to $500
Title search and title insurance
$400 – $900
Survey fee
$150 – $500
Prepayment penalty
2% of the loan balance for the first two years and 1% of the loan balance for the third year
VA purchase loan
New American’s VA purchase loans are available to eligible military borrowers with no down payment required. This can be an ideal solution for those who may not have enough funds to cover a large upfront cost.
A purchase loan offers further benefits, such as no PMI requirement or prepayment penalty. With VA purchase loans, borrowers can also finance closing costs up to 4% of the purchase price and receive funds for improvements that enhance the home’s value or energy efficiency.
VA loan type
Loan amount
Interest rate
Annual percentage rate
30-year fixed VA purchase
$295,000
5.250%
5.717%
VA cash-out refinance
A VA cash-out refinance loan can be a great way to use the equity in your home.
With this type of loan, you get a new mortgage to convert some of your home equity into cash. This option may also provide tax benefits since it is typically considered a form of debt consolidation rather than income generation. For example, if you itemize your deductions, you may be able to deduct some of the mortgage interest paid on a VA cash-out refinance. This can result in a lower taxable income and a lower overall tax burden.
VA cash-out rates change daily based on market conditions. The following cash-out rates are current as of April 2023:
VA loan type
Interest rate
Annual percentage rate
30-year fixed VA cash-out
6.750%
7.103%
30-year fixed VA cash-out
6.990%
7.349%
VA energy-efficient mortgage (EEM)
VA loans for energy efficiency improvements can cover items such as storm and thermal windows, solar heating, cooling systems and heat pumps. These loans are not intended for non-permanent purchases such as appliances or window air conditioning units. VA loans can provide up to an additional $6,000 for qualifying energy efficiency improvements, helping you reduce monthly utility bills while improving the value of your home.
The following energy-efficient upgrades are eligible for the VA EEM Program:
Solar energy systems
Caulking, weather stripping and vapor barriers
Upgrades to furnace and heating systems
New thermostats
Upgraded insulation
Upgrades to windows and doors
Water heater upgrades and insulation
Heat pumps
VA Native American Direct Loan
The Native American Direct Loan (NADL) is a program for Native American veterans and their families that allows them access to the same financial advantages of conventional mortgages, including no down payment or monthly mortgage insurance.
Additionally, the NADL offers the ability to build or purchase a home on federal trust land and make repairs on an existing property. This provides Native Americans with more flexibility in choosing where they want to settle.
New American VA Loans Pricing
New American Funding VA loans offer fixed-rate mortgages with repayment options of 15, 20 and 30 years. The shorter the term, the lower the rate — however, your monthly payments will be higher. For adjustable rate loans, adjustable rate caps can be as low as 2% for initial adjustment periods and 5% for subsequent adjustments.
Borrower credit history is a major factor in determining your New American Funding loan rates. Loan and down payment amounts also affect mortgage rates. Larger loan amounts can result in higher interest rates due to increased risk to the lender. Lenders also consider your debt-to-income ratio.
If you’re a low-income borrower, you may be eligible for the Freddie Mac Refi Possible program, which includes a $500 credit toward your appraisal cost and five years of no interest.
The table below shows New American Funding’s VA loan rates:
VA loan type
Interest rate
Annual percentage rate
30-year fixed mortgage
5.250%
5.882%
15-year fixed mortgage
5.000%
5.645%
30-year VA cash-out refinancing
6.625%
6.978%
30-year fixed VA purchase loan
5.250%
5.717%
VA Native American direct loan
6%
6%
New American Funding Financial Stability
New American Funding has seen a recent shift in its Fitch Ratings outlook, a common measure of financial stability, from negative to stable. This upgrade reflects improvements the company has made to its management team and risk environment and investments in compliance management systems. As a result, New American Funding is now better positioned to ensure consumers and businesses access to reliable and secure mortgage services.
New American Funding Accessibility
Availability
Unlike some lenders that offer 24/7 live customer support, New American Funding is more limited. Customers can contact the company Monday through Friday from 8:00 a.m. until 9:00 p.m. CST or on Saturdays from 10:00 a.m. until 2:00 p.m. CST. You can also make payments through your account on New American Funding’s website.
Contact Information
You can reach customer support via phone at 1-800-893-5304 or by email: at [email protected].
You can also use New American’s branch locator tool to find a loan office near you. You can review your loan application status or your account through the online portal.
User experience
New American Funding’s online portal makes it easy to stay up-to-date on your loan application with real-time tracking. Additionally, you can access various New American Funding loan payment options through a secure online system.
You can also browse the company’s Mortgage Resource Center to find information about mortgage payment assistance programs, the latest mortgage news and tips for getting a good VA loan rate.
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New American Funding Customer Satisfaction
New American Funding mortgage reviews from customers significantly exceed industry standards for mortgage servicing satisfaction. New American Funding reviews have a 4.90 out of 5 in customer ratings on Zillow based on more than 8,800 reviews. Additionally, it scored 695 out of 1,000 in J.D. Power’s 2022 U.S. Mortgage Servicer Satisfaction Study — well above the industry average of 607.
New American VA Loans FAQ
What’s the difference between a VA loan and a conventional loan?
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A VA loan is a type of mortgage backed by the U.S. Department of Veterans Affairs and is available to qualifying veterans, their surviving spouses and active duty personnel. These loans offer competitive interest rates and no down payment requirements. They also don’t require private mortgage insurance. It’s important to note that a funding fee can be rolled into the loan amount or paid at closing.
In contrast, New American Funding’s conventional loan is not backed by the government and typically has stricter credit requirements than a VA loan. Additionally, these loans usually require a higher down payment and more expensive fees.
What are the benefits of a VA home loan?
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When you take out a VA loan from New American Funding, you can take advantage of the following benefits:
Up to 100% financing, even for those with less-than-perfect credit
No private mortgage insurance
Funding fees rolled into the loan
Quick loan closings
No down payment required
Lower interest rates
No monthly mortgage insurance premiums
No prepayment penalty
Reduced funding fees
What are the eligibility requirements for a New American VA loan?
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To be eligible for a New American VA loan, you must have a Certificate of Eligibility (COE) and sufficient income. To get a COE, you must be an active service member, veteran, National Guard, or Reserve member.
Spouses of veterans may apply for a VA home loan if they meet specific requirements. If a spouse’s partner is missing, is a prisoner of war or if remarriage has not occurred after a service-induced disability or death, they may qualify for a loan.
How do I apply for a New American VA loan?
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To apply for New American loans, you must:
Apply for a Certificate of Eligibility (COE) that verifies your eligibility status for a VA loan.
Work with a mortgage specialist to choose the best loan for your needs.
Apply for the loan, either online or with the support of New American’s specialists.
Your lender will then take care of the home appraisal process for you.
How we evaluated New American VA Loans
We looked into VA loans from 20 major mortgage lenders to find the best options for veterans and their families. We compared New American Funding mortgage loan reviews and evaluated rates, repayment options, fees, customer service, closing times and additional benefits.
Summary of Money’s New American VA Loans Review
Military service members, veterans and military families looking to qualify for a VA loan to buy a house may find New American Funding appealing. You can finance up to 100% of the home’s value and take advantage of quick closing times, even with a lower-than-average credit score.
On the other hand, New American Funding does not list its credit and income requirements online. Check out the best VA loans from top mortgage companies if you’re looking for a lender that provides in-person assistance or is more transparent about its rates and fees.
Last Updated on February 25, 2022 by Mark Ferguson
Rehab Valuator is a real estate investing program that analyzes properties for flipping, wholesaling or renting. I had the opportunity to try it out and provide my own Rehab Valuator Review. The Rehab Valuator is a great tool and the lite version is absolutely free. It helps you estimate repairs, calculates financing costs, figure returns and profits. I am constantly writing about the costs involved in flipping because so many beginners underestimate them. The Rehab Valuator program does a great job of figuring all the costs for you and even figures the 70 percent rule, which many flippers go by.
I don’t review many products on InvestFourMore, because I only endorse products I believe in. I have tried out many products that I thought were lacking in substance or extremely overpriced and you don’t hear about those products, because I don’t feel they deserve any publicity. I have tried out more than a few real estate investing programs and most of them are not worth the money. This is one of the few products that I feel is worth the money.
How can Software help house flippers?
The Rehab Valuator Software is extremely easy to use. Daniil Kleyman created the program, who is an extremely experienced real estate investor. He has invested in many rentals, flips, and commercial projects. The program helps fix and flippers in a number of ways including determining financing costs, figuring repairs, determining closing costs and carrying costs. When I first tried out the program I was able to determine the potential profit on one of my flips in about five minutes.
The program is in an excel sheet that prompts you to enter the important data on a flip; loan terms, repair estimates, length of the rehab, purchase price, closing costs, selling costs and after repaired value. The form gives pre-populated values and percentages for common costs of these items and is very accurate in my experience. The program then tells you the potential profit, the cash needed and the return on your investment.
Financing costs
The program is great for flippers because they have many features built in for hard money loans. You can choose a loan amount based on the ARV, you can choose the points to be paid when you sell the house like you would with hard money. If you have other types of financing, then that can be entered into the program as well, but it is a little trickier. I could not find a way to enter a loan to value amount on the purchase price, but I could adjust the percentage of the ARV loan percentage until I reached my loan amount.
Repair costs
The program has a separate page just for repair costs on flips. The program does not give you common costs for repairs, which is understandable since costs can vary so much depending on the scope of work and your location. The form lists many repairs that would need to be done; you enter a dollar amount for the repairs, a time frame to complete them and the form computes the repairs and time frames into the entire equation.
Carrying costs and selling costs
Many investors forget about carrying costs when flipping homes. You have to account for insurance, taxes, utilities, and maintenance when you hold a property for months. The Rehab Valuator lets you input all the holding costs as a lump sum or enter each cost on a monthly basis. The program then calculates the costs based on the number of months you will hold the property. The program also lets you enter the selling costs as a percentage of the selling price. Those costs would include commission, title insurance, recording fees and a few more.
Profit
When you enter all the data into the program, it gives you a total profit number and return on your investment. I used numbers for a flip I am almost done with and my profit came out to $68,000 and a 78 percent return on my investment. I like those numbers and I will detail this flip in my fix and flip update articles. The great thing about the profit number is you can change financing terms or length of time you hold the property to instantly see how much your profit changes. The program even has a spot where you can enter a percentage of the profit to be split with the lender or an investor.
My Rehab Valuator review: Can it help wholesalers?
The Rehab Valuator has some great features for wholesalers as well. There is a very simple program to determine what price a wholesaler would have to buy a house to sell it to an investor who would flip the house. Enter the ARV, the repairs and the profit the wholesaler takes, and you get the price you can pay for the property. The only issue I saw with this calculator was you can enter carrying costs and closing costs, which decrease the offer price even more. In my experience, the 70 percent rule works without having to enter holding or carrying costs as additional expenses. You can also adjust the 70 percent value to be 65 percent, 75 percent or whatever value you want.
Another great part of the program is it generates detailed, professional reports that you can give to investors who may want to buy the wholesale deal. You plug in the numbers for the repairs and other costs and the Valuator generates the report that will make you look like it was created by a professional. The more information you can give to the investor, the more comfortable they will feel buying a house from you.
What about rental properties?
Rehab Valuator also has a program that calculates returns on rental properties. This program is similar to the flip program as far as the data you enter but gives different figures for returns, cash flow and lets you include information on refinancing.
Financing costs
When you enter the loan terms, you use the same form as when you entered loan terms for the flip. You can then enter terms for a refinance after you repair the property. This is a nice feature because it lets you see what your returns and costs would be if you use hard money to refinance into a conventional loan. The only problem with this form is I could not turn off the refinance feature, so if I wasn’t refinancing I have to change the numbers around on the refinance terms to match my original loan. I can change the numbers pretty easily to match my interest rate and loan amount to what the original loan would be.
Repair costs
You can enter the repair costs just as you would with the flip calculator and it will factor those into your repairs. The program also tells you exactly how much cash you will have invested in the rental property after down payments, repairs, and closing costs.
Cash Flow and Cash on Cash
The rental property program will take all the figures you plug into it and give you cash flow, cash on cash returns, cap rate, and even DCR. The DCR is the debt coverage ratio and is a tool many lenders use to evaluate how good of an investment your rental is. The program has more forms where you would input the monthly expenses including vacancies and maintenance to come up with the cash flow.
The rental property Valuator and the flip Valuator can both be seen on the same page to help you determine whether it is better to rent the house or flip it. I wish I could see the rental property numbers on their own without the flip Valuator, but that is not a feature yet. If you are using different types of financing on the rental versus the flip, you have to manually change all the financing numbers to see a comparison.
How Rehab Valuator can help you get private money funding
Rehab Valuator also has many reports that can be created to help find investors or private money. You can attach pictures, enter comparable property information and couple that with the flipping or rental property numbers to create a professional looking report. If you are trying to secure private money or a partner, they are going to want a lot of information. Those investors will not want that information scratched onto napkins or lose notebook paper. The more professional the package is the better chance you have getting investors to give you money.
How easy is the program to use?
The program is very simple to use and comes with video instructions if you have any problems. The program also has great customer support if you need personalized assistance to get it up and running. I was able to get started right away as it is very straightforward. Each number you enter into the program is on a numbered line and each number line has instructions on what the figure is and what it means to you. The tricky part comes in with some of the financing options if you are not using hard money with a flip or you are not refinancing a rental property. You can still work around those items and there may be a better way to enter information that I have not found yet.
Conclusion
I think the Rehab Valuator is a great tool for flippers, wholesalers or buy and hold investors. The Rehab Valuator lite version is available for free here. The lite version does not come with every feature I described here, but it gives you a great idea of the functionality of the program.
Plenty of eligible homebuyers don’t know what the VA loan is, which is unfortunate because this is one of the best home loan products available.
A lender who specializes in VA loans will be able to help you evaluate how a VA loan fits your specific situation, but here we’ve tackled the most common VA loan questions and answers.
Check today’s VA rates (May 6th, 2023)
Who is eligible for VA loans?
Most veterans and active duty service members are eligible. However, all veterans, active-duty service members and National Guard members must meet certain requirements.
To be eligible, you must have met at least one of the following:
Served 90 consecutive days during wartime
Served 181 days during peacetime
Have more than six years of service with the National Guard or Reserves
Also, VA loans are available to the surviving spouses of military members who died in the line of duty.
How is a VA loan different from conventional or FHA loans?
For one, the VA loan is guaranteed by the Department of Veterans Affairs. This is similar to FHA loans which are backed by another government organization. Conventional loans aren’t backed by anyone.
Another difference (and it’s a big one) is VA mortgage rates tend to be much lower than both FHA and conventional rates. In October of 2019, 30-year fixed-rate VA loans closed with an average interest rate of 3.68%, as compared to 3.94% and 3.98% for FHA and conventional, respectively.
How much can I borrow with a VA loan?
Previously, the VA loan program required borrowers to make a down payment on any loan that exceeded conventional loan limits.
But not anymore.
As of January 1, 2020, borrowers who are eligible for mortgage loans can get any size loan with no down payment. There are no official limits.
But remember, you’ll still have to qualify for the mortgage.
If you’re looking for an extra-large VA loan with no down payment, make sure you have a solid income and excellent credit score.
What credit score do I need to qualify?
Technically, there is no minimum credit score to qualify for VA loans. However, most mortgage lenders will want to see a credit score of at least 620 before approving the mortgage. In some cases, VA home buyers can get approved with scores below 620.
Do I need to make a down payment?
One of the biggest benefits of the VA loan is no down payment is required. The VA guarantees the mortgage, so you can secure 100% financing. It’s also possible to finance some of the closing costs or get the upfront costs covered by the seller.
Not only is it possible for VA home buyers to avoid a down payment, but it’s a popular option as well. In October 2019, the average VA loan down payment on a home was just two percent. Down payments aren’t required, but they can save you money on your monthly payments.
Click to check your VA eligibility (May 6th, 2023)
Do I need to pay mortgage insurance?
Another benefit of having the VA guarantee the mortgage is you don’t have to pay mortgage insurance. Private mortgage insurance (PMI) or mortgage insurance premiums (MIP) are required for smaller down payments on conventional and FHA loans. But no matter how much you put down on a VA loan, you won’t have additional insurance payments on top of your mortgage payments.
How long is the VA loan process?
There’s no set-in-stone time limit for how long the VA loan process takes, but it does take slightly longer than other programs on average.
In June 2021, the average VA loan closed in 55 days, according to the June 2021 Ellie Mae Origination Report. By comparison, the average conventional loan closed in 48 days and the average FHA loan closed in 54 days. So, for the most part, a VA loan will take slightly longer than other loan types, but not by much.
Can I only use a VA loan once?
If you’re eligible for the VA loan, then you’re eligible for your entire life. Plenty of home buyers end up using the VA loan more than once, mostly because it’s arguably the best loan program out there.
You can be eligible to use your VA entitlement benefit again for a new loan if:
You’ve paid off your previous VA loan
Your VA loan has been assumed by another veteran
You haven’t used all your entitlement
How long does getting pre-qualified take?
Pre-qualifying is quick, and it can be started online.
If you’re interested in becoming a homeowner at any point in the future, then getting pre-qualified is a good idea. You can get pre-qualified even if you don’t have a house in mind, or if you haven’t even started looking. A pre-qualification will give you a better idea of how much home you can afford, so you should do this before you start shopping around.
Click to begin the pre-qualification process (May 6th, 2023)
How do I get proof of eligibility?
A certificate of eligibility (COE) demonstrates to your lender that you’re entitled to VA home loan benefits.
It’s straightforward to obtain via the VA’s website. Veterans will need to upload their DD214 form. If you’re still serving, you’ll need a statement of your military service signed by your “adjutant, personnel office, or commander of the unit of higher headquarters.”
However, it’s easier to get your lender to do this for you. If you provide your DD214 or statement of service, then the lender can get your COE directly from the VA on your behalf.
What kind of home can I buy with a VA loan?
Like other loan programs, VA loans have rules about what you can and cannot buy. VA loans are intended to provide veterans and service members with a primary residence. That means they can be used to purchase a single-family house, a townhouse or an apartment. Beyond this, the rules get more complicated.
You cannot use a VA loan to purchase a vacation home or second house or investment property. You can purchase an apartment building with up to four units, but one of the units must be your primary residence.
Mobile homes can be financed with a VA loan, but qualifying can be tricky. And you cannot use a VA loan to purchase real estate in a foreign country.
Can I rent out a home I purchased with a VA loan?
As noted above, VA loans are meant to get veterans and service members into homes so they can’t be used to purchase rental properties.
However, if you’re moving, you don’t necessarily need to sell your existing home if you have a VA loan on it. You can keep your home and rent it out, even with an existing VA loan on it.
There are two ways to do this: 1) Depending on how much equity you’ve accrued in your existing home, you may be able to refinance with a VA streamline refinance (IRRRL) or a conventional loan and get a one-time VA entitlement restoration. Your VA benefit is restored in full and you can get another VA loan for your next home. Or, 2) If your current home was inexpensive, you may have remaining entitlement left over. In that case, you can apply any remaining entitlement towards a new home.
What is a VA appraisal?
A VA appraisal evaluates whether the home is worth what you’re willing to pay for it. Your lender will order the appraisal, but the appraiser will be an independent, licensed appraiser who is approved by the VA.
The appraiser will assess the condition of the property, making sure it has:
Functional roof, heat, plumbing, and electrical systems
No pest issues
No lead-based paint
No water intrusion
No health or safety issues
What’s a VA funding fee?
The VA funding fee is an upfront, one-time payment determined by your loan amount and your service history, among other factors. The funding fee typically ranges from 0.50% to 3.60% of the loan amount.
This is small compared to the home loan cost savings veterans enjoy, but it allows the VA loan program to be self-sustaining, rather than using taxpayer dollars or funds from other VA benefit programs.
Can I finance my VA funding fee?
The VA funding fee can be financed into your loan to reduce out-of-pocket expenses, but remember this will add to your overall loan balance.
Is a VA loan always the best option for service members and veterans?
Not necessarily. There is no one-size-fits-all loan. The best choice for you will depend on the specifics of your situation. For example, if you’re making a down payment of 20% or more, a conventional loan might end up being less expensive.
Talk with a loan officer who specializes in VA loan products to evaluate your options and find the best fit for you.
Click to check your VA eligibility today (May 6th, 2023)