Mortgage Secrets Most Buyers Don’t Know: Bank Statements, FHA, and Creative Financing Explained

Gabriella Godde (00:00)
Well, that’s a great question. But I would say first thing would be is look for instance, if you live in LA, maybe buy out of the outer skirts of LA to then get the sales prices down. That’s one way. The other way is to if you can buy units up to four units, you could buy four units with an FHA loan, three point five percent down. You use the rental income of the other three units to qualify you. And then you live in one of the units and you rent out obviously the others. They may be rented already.

Dylan Silver (02:10)
Hey folks, welcome back to the show. Today we’re joined by Gabriella Godde, a mortgage professional in California, an entrepreneur with decades of experience helping people build wealth through real estate. Known as California Mortgage Girl, Gabriella specializes in creative finance, wholesaling, new construction, and helping clients navigate the path to homeownership and investment opportunities throughout California. Gabriella, thanks for taking the time today.

Gabriella Godde (02:36)
Thank you for inviting me to be on your podcast, Dylan.

Dylan Silver (02:38)
Absolutely. You know, we were talking in the green room and I’d like to start the show by asking you what you’re seeing in the California market newer homeowners and first time buyers do in order to qualify. There’s a lot of millennials and younger generations who in some cases are feeling trapped out of the market. What are you seeing folks do in order to get into their first home?

Gabriella Godde (03:02)
Well, that’s a great question. But I would say first thing would be is look for instance, if you live in LA, maybe buy out of the outer skirts of LA to then get the sales prices down. That’s one way. The other way is to if you can buy units up to four units, you could buy four units with an FHA loan, three point five percent down. You use the rental income of the other three units to qualify you. And then you live in one of the units and you rent out obviously the others. They may be rented already. And that rental income is actually helping you pay that mortgage every month.

Dylan Silver (03:45)
Now in order to take advantage of that, we’ll call it a house hacking strategy or a duplex, triplex, quadplex, do people have to be able to show that they could qualify based off their income without the rental income? Meaning if they wanted to qualify for this four unit that they’d be able to purchase it by themselves?

Gabriella Godde (04:04)
No, so basically the duplex, they can use the rental income on the second unit, correct? On the third and fourth, on the triplex and the four units, it’s called the self-sufficiency test. So the only way that you could get the FHA loan on that one is you have to bring in enough rental income on the two or three units to pay for the mortgage itself. So that’s the only caveat on that loan is that it has to have some decent rents, which is actually good for that buyer. So I think that and the other thing is they could also buy conventional with 5% down since they changed those laws about a year almost a year ago, where you could buy units up to four units with 5% down now on a conventional. And that— on that loan, you do not have the self-sufficiency test.

Dylan Silver (04:56)
Now, for folks who may have good credit or they may be entrepreneurs and taking large tax deductions, is this a strategy that they could employ if their you know 1099 or their Schedule C is showing them as low income because they took such large deductions?

Gabriella Godde (06:01)
Say they would want to use more of a bank statement loan if they’re writing everything off on their tax returns and have you know their gross income is high, but their net income is low because we’re gonna look at the net income, not the gross income on their taxes. So I would say they would use a bank statement loan, they could go with 10% down on a single family, probably 15% down on the three to four units. But yeah, it’s a little more money down that way, but they could qualify with 12 months bank statements. And what we look at is we look at the deposits every month and then we give them an expenses of like 30%. and then the rest is their income. The other type of loan too is a profit and loss. If you have your CPA do a profit and loss, you don’t have to show all your bank statements. So that’s another really good loan too.

Dylan Silver (06:54)
When we talk about these alternative products in order to get people into homes. You mentioned profit and loss and bank statement. It can be confusing for newer homeowners who are try— or prospective new homeowners who are trying to navigate, especially if they’re going to multiple lenders and maybe getting sometimes conflicting information. I need twenty four months, I need twelve months, I’m gonna need ten percent, I’m gonna need fifteen percent, twenty percent. Do you recommend folks, you know, stick with one lender and just ride that relationship and see how that goes? Or should they maybe test the waters with several and see who is the best fit and also maybe has the most breadth of knowledge.

Gabriella Godde (07:34)
You definitely want to have a good loan officer on your side because that is the tell of everything. Like that’s the only way you’re going to get a home loan. and especially if you’re being creative. so you definitely want to have a loan officer that’s seasoned. If you’re gonna go to a loan officer that’s been in the the field for two years, they’re not gonna get exactly what to do on all the different programs. There’s also so many guidelines to know that. If you’re a newer loan officer, you’re not going to know those guidelines and then you’re going to tell someone, yes, they could get this house, and then they get into escrow and then guess what? They can’t get that house. So for instance, just on that FHA with the self-sufficiency test, if that loan officer doesn’t know about that test, they could get into escrow, they could order the appraisal, they could get and then once the underwriter gets the loan, they’re like, “No, no, they can’t qualify.” So they definitely want to choose a loan officer. They want to have a good relationship with that loan officer. And obviously they want a bond with that loan officer. That loan officer is going to be pretty— getting pretty deep into their situation, meaning they’re going to know their income. They’re going to ask them questions. We’re going to ask questions on their bank statements like, “What’s this deposit for?” How many kids do you have? I mean, we get pretty personal on the loan application. So you want to have a loan officer that you’re comfortable with.

Dylan Silver (08:52)
I mean absolutely. I I think there’s some people who are shocked when they find out they’re going to be probed for questions like, “Hey, you missed a payment like a year and a half ago on this credit card. What happened there?” And you’re like, “What did I miss on this payment?”

Gabriella Godde (09:06)
The other hack I have is you know, the underwriters are looking at your bank statements very closely, like every payment you’re making, are you eating at McDonald’s? No, I mean, you know what I mean? And they’re looking at everything. And so what I started doing is I started paying with my credit cards and then and then paying my credit cards off every month. So now my bank statement, my ATM, I don’t, I’ve never, I don’t use my ATM. When you use your ATM, all of that is on your bank statement. If you use a credit card and just pay it off for every month, obviously you want to have the income limits pretty high. You don’t want to ever max out your credit cards. That’s another thing that people need to know is when they use their credit card, let’s just say they have a 5,000 limit on it and every month they’re charging 4,000. That’s a big no-no. You want to keep that charging at like $2,500 or less, even if you’re paying it off that month. So that— that’s a another hack that people could use.

Dylan Silver (10:03)
Is it a misnomer that let’s say you have good credit, you know, from a a car that you’ve financed or something else that you’ve financed, and you have a large down payment, you know, multiples, tens of thousands of dollars down. Do you absolutely have to have, you know, revolving consumer debt in the form of credit cards? Is that a necessity in order to get home?

Gabriella Godde (10:58)
On FHA it is not. You can have alternative credit. And what that means is you could use your cable, your cell phone, your rental payments, things like that. You’re gonna need like three or four of those. So on FHA, you don’t technically need it. but just know that when you do have it, it’s going to give you better credit scores. You know, when people do have the 720 plus FICO scores, it’s because they are using their credit. So the people that don’t have credit, they’re not— they may not have good FICO scores. So that’s something to think about, to have some credit cards and a car payment, that kind of thing. But on conventional, you definitely have to have four trade lines in order to get a conventional loan.

Dylan Silver (11:43)
Let’s break that down. When we talk about trade lines, is this specifically, you know, credit cards or could this be, you know, credit at a store if you’re a flipper and you’re going to Home Depot, for instance?

Gabriella Godde (11:55)
It could be any type of credit.

Dylan Silver (11:56)
Pivoting here, you’re active in the creative finance space as well, which I mentioned to you before hopping on here. I haven’t seen as much of this from folks who are active in the traditional mortgage lending side as well as creative. How did you get active in the creative side?

Gabriella Godde (12:13)
Well, I’ve been doing the home loans for many years now, twenty-eight years. And you know, you get a lot of people that call you for different, you know, that everybody’s situation’s different. So you have to figure out if I didn’t know it, then I have to really look into it to figure out what can I do to help them. so there’s, you know, there’s construction loans. I’m doing a construction loan for me right now. And what people probably don’t know about the construction loans, because I didn’t know, is that you can get a construction loan. It has to be on a rental property. So I’m— it has a— I’ll have a tenant in there. I got the house inherited to me by my parents, but that the house needed a whole rehaul. So I’m getting like five hundred and fifty thousand dollars to redo the whole house. Basically, right now it’s just— it’s the house is just gutted out right now. It’s just has walls up. So we’re— we’re not doing a completely ground up construction. But the what people don’t know about this wonderful loan is that the time that you’re doing the renovations, you have no payment. So I get the loan, I get the, you know, and I’m paying the contractor as we’re doing the work. And then at the end, it— when everything’s done, then my payments will start. And then I would do a refinance to get it into a different type of loan. But I think that’s a great, great creative loan for people that are getting, you know, houses inherited to them. Let’s say they’re not living in it. It has to be an investment property. So that way they could rehab it. Then they could rent it out. A lot of people, what— what people, there’s so many people that have so much equity in their homes and they just don’t know what to do with it. Yeah. They don’t know it. There’s— they don’t know that there’s all these loans that are available to, you know, help them get that house rented out. Help them get that house, you know, looking beautiful. You know, there’s so many things. Even if someone is living in their home, they have all this equity, they— the house needs all these repairs. I don’t care if you have a low interest rate, you could still get a second or a HELOC to do the work, or you could get a refinance and still have a really good payment to then live in a beautiful house. I’m all about beautiful houses.

Dylan Silver (14:31)
Hey, it’s where you’re living, right? You want to have something pretty to look at if you’re, you know, living there, eating there, potentially working there with everybody working or so many remote work. Now, when we talk about affordability, of course this is a hot subject across the country, and I imagine even more so in many markets in California.

Gabriella Godde (14:39)
Yeah.

Dylan Silver (14:50)
And I understand that there’s a huge influx of ADUs, accessory dwelling units, or at least interest in this, but there’s also some difficulty where how are these going to be financed? Because we own the— the land, right? Can we include this? How is this going to work? How’s this going to appraise? And then you also have people who are getting into tiny homes and modular homes and you know manufactured housing and affixing that to the land and then it qualifying for FHA. Are you seeing more folks coming to you asking— asking these types of questions about how they can use, you know, an FHA loan or— or similar products, maybe going conventional to finance some of these other asset classes?

Gabriella Godde (16:12)
Yeah, there’s all kinds of loans to have you be able to do an ADU or even do— you could actually even do a purchase on a house. Let’s say you find a house that’s just in shambles, you could actually get an FHA loan, 3.5% down, get $100,000 or $150,000 to do the remodel. They give you the money, they give you half of the money up front, half of the money once it’s all done, the— the balance of the money once it’s all done. The main thing on that loan is that you need a good contractor, you need a general contractor, and you have a bid right from the beginning. Let’s just say you find a house, you’re gonna purchase it, you need a a contractor that has a license, they give you the bid, and then we close that loan or we we order the appraisal, and the appraiser is gonna appraise that house as if all the work is already done. So now you’re getting a house and you’re now already getting equity in that house because that house is probably— you’re buying it probably for $500,000. But by the time you’re done with all the all the upgrades, it’s gonna be worth $650. So you’re building that equity right away. So that’s a really good loan. It’s the FHA 203k loan. But you can also do the, you know, add an ADU on your property. So if you have room to do an ADU, there’s loans for that as well. So yes, we always— we’re we’re getting all kinds of calls on those.

Dylan Silver (17:39)
Now, for folks who are trying to determine exactly where they’re going to, you know, live, but also what type of home is going to work for them, both from a qualification standpoint, but also for potentially expanding their family and a long-term job, etc., there’s so much arithmetic that’s going in here. I’m seeing that more and more the lending and the mortgage professional is almost— and I hate to say this as a realtor, but it’s— it’s in many ways doing multiple jobs. You’re both helping people get qualified, but you’re also guiding them through a lot of questions which maybe in the past decades would have been, you know, a realtor’s job. Are you seeing that you’re guiding folks in multiple ways, not just helping them get qualified?

Gabriella Godde (18:24)
I hate to say it, but I do a lot of the what the real estate agent would be doing. When I’m— so I do a first, my first consultation is a five-minute, you know, asking them all the questions. I ask them, where do they live? Where do they want to live? How much is their income? Are they W-2 1099? what’s their monthly debt? Do they have a car payment? Do they have credit card payments? How much money do they have saved? And then with all that, I could then calculate where— where I think they qualify, because you know, just just basically by them knowing what’s on their credit. And then from there I say, “Okay, well, you will be able to live in this area, or you wouldn’t be able to live in this area.” I always look on Redfin, and I just go on there and put in, you know, where— where they want to live. But then if they can’t live there, I’m gonna go on the outskirts of where I go, “You know, this is where you would qualify, this is where you could find a house.” So you know, it’s— I’m giving them a lot of information. So they’re either gonna buy or they’re gonna wait. You know, so it just depends on what— what happens with that person. But yes, I I definitely feel like I do a lot of the real estate agents job in the beginning. In fact, this one client, I actually got the offer accepted because my— the real estate agent that was working with the client was really busy. I called the listing agent, told them the buyer wanted to see it, got him in the house, called back the listing agent once they said they wanted it. And so I basically got this offer accepted and became very close with this listing agent because he’s like, “Well you,” it— he goes, “It sounds like you’re like doing the real estate agent’s job.” I go, “Well, I knew my buyer really wanted that house, and if we waited for the other agent, they would have never got the house.”

Dylan Silver (20:09)
I mean, going the extra mile, going to the mat for your clients. That’s— that’s really everything that you could ask for. One of the big frustrations that especially newer buyers have is, you know, they’re getting so much information and they feel like, well, they’re left holding the bag in many cases. You mentioned a lot of newer, you know, loan officers. That’s certainly felt from clients where they’re maybe feeling like, “Gosh, I don’t know where to go from here,” or they said, “Follow up in a couple of months.” Well, is it now time? Has my situation changed? There’s also some level of uncertainty with, you know, am I bothering this person? And it’s funny because you’re like, “Well, you’re potentially giving them a commission, so that should never be the thought.” But a lot of times people just miss out on that ability to have that extra step. You talk about calling the listing agent. What other mortgage officer, loan officer is going to do that? So my hat goes off to you for really, again, going to the mat for your clients. I want to ask you about new opportunities that you’re seeing and also, you know, things that you’re particularly excited about in— in the business right now. California has so much going on and you’re involved in the creative side, the conventional side. We talked about ADUs. Is there anything currently that is coming across your desk that’s particularly exciting or you’re interested in these days?

Gabriella Godde (21:27)
Am doing a loan right now that I am excited about. It’s a conventional 5% down, but it’s down payment assistance. And the reason why I’m excited about this loan is the current buyer already owns a home, so it’s not a first-time home buyer. They’re able to keep their home if they want to move up, move down, whatever it is. There is a grant that people could use to then buy another house. So they’re basically buying another house, they’re using about 12. thousand dollars of their income or— not income, of their assets to buy this other house so if someone does own a home they could get some grant monies to buy another home there’s no income limits on it it’s a really good loan and— and now they be— now they become investors because now they could turn their current home into a rental and then have another home. The other thing that I love is yeah, I was just talking to another client. He bought a house all cash in October and he was coming to me to buy another house, and that one fell through. The— the listing agent didn’t accept his offer. But I told him, I said, “You know what?” I said, “I think you should pull out money from the house that you just bought all cash. Let’s pull out some of that money, let’s say 150,000, whatever, put it in the bank, buy another house, move into that house, rent out your current home that you have.” And what he expressed to me is he wants to be an investor. I said, “You could buy a house every year with five percent down. Since you’re not a first-time home buyer, you put five percent down, and every year you could be moving into another house and building your portfolio.” I think that would be ideal for him, and it would be ideal for some— somebody that’s wanting to build the— their own portfolio.

Dylan Silver (23:17)
Are we talking about the BRRRR method here in that strategy?

Gabriella Godde (23:20)
I mean, I don’t know what that is, but I just know I’m just thinking it’s— it— you could buy a house every year using these owner occupied, you know, as long as you’re gonna move into that new house, you could do this every year.

Dylan Silver (23:30)
One of the amazing things about being able to qualify with five percent down is it makes the door of real estate investing open to so many more people. I’m shocked to hear this. I thought if it’s not gonna be your primary residence, if this would potentially be an investment property that you’re gonna need like twenty percent down. So being able to come to the table with five is a— is a game changer. Is this something that’s only available in California?

Gabriella Godde (23:55)
No, that’s a— it’s available everywhere. The other thing is they could also have another FA— an FHA loan. So you could have one FHA loan and then the rest of them could be conventional five percent. So the first one could be of FHA with three point five percent down, and then the rest could be five percent down.

Dylan Silver (24:12)
Hm. Is there— is there a limit to this, how many times you can do this?

Gabriella Godde (24:16)
I think that I think that lenders may cap like once you owe t— own ten properties, then they’re gonna be like, “Okay, you— you don’t fit the, you know, normal.” Now the thing is is they also have to know that in it— in order to keep qualifying for a house, that they have to make sure that they put the rental income on their taxes.

Dylan Silver (24:37)
Mm. Yeah. So you gotta keep keep that up too. That’s always you know, it’s like what do you do? Because you— you report the income now or not report the income. If you don’t deduct the income, now you’re paying more in taxes, you’ll qualify for more, or you can— you take the deduction, but then you won’t potentially qualify. So investors are constantly balancing that. We are coming up on time here, Gabriella. Any new projects that you’re working on and then also anything you’d like to mention directly to our audience?

Gabriella Godde (25:08)
I just wanna let investors know that there’s so— or not investors, but anybody that owns a home currently, that there’s a lot of loans out there for investment loans, which is the DSCR. Basically what that is is as long as you’re able to put twenty percent down, you could refinance or not refinance, you could get a second on your home to pull out cash to then put 20% down on the home. and that one would get you that one you don’t have to qualify for the income. The rental income is going to qualify for that loan. So let’s just say someone is retired and they don’t have a lot of income, but they have some assets behind them, they could be buying a house with the DSCR loan. And so that one is— we’re just looking at the rental income to qualify for that loan. Then there’s also— I mean there’s so many loan programs out there. I mean, we have everything you could think of is out there to— to get. And so I know that there’s just a lot of people in their houses sitting with a lot of equity. And you know what? If— if you’re— if you’re on the older side, you know, that— that money is going to go to your children, which is great. But you could also you— utilize some of that money and also be taking a vacation and enjoy your— your life now. And you know, I don’t know. I j— I just think live now and you know play, have fun now, you know, still have a nest egg for your children and for yourselves, but also you know, utilize the equity that’s in your house.