Portfolio Lender Terms

I want to document my experience when I talked with 2 portfolio lenders. These 2 lenders are referral from my homebuilder. When we built our home in 2014 through a semi-custom home builder, Trinity Signature Homes, I have established a good relationship with the builder owner. Fast-forwarding to 2015, I thought he may be a good source to obtain some potential financiers. When I asked him if he could help out, on that same day he was so nice enough to send me 6 banks that he has worked with before. These banks has provided short term construction loan to him to build houses in Houston.

The next day, Robnnie Kirkwood from BancorpSouth Bank called me in the morning. What a surprise. It was nice for a lender to reach out to an unknown customer. Anyways, in the course of the discussion, he mentioned his general terms are 20 yrs amortization with 25% down. Of course, this is only at a point of time (Q2 2015) so he may have other programs to offer in the future. Ronnie mentioned he doesn’t have a certain debt to income ratio he has to hit, but it is one of the criteria he certainly takes into consideration among the other important economics of the rental property. Since I still have a full time job, he says that is a plus as if the property is not working out, I can still rely on my corporate job to get the debt service paid on time. I will have to of course partner with a property management company if I am buying into apartment building as I won’t have time to actively manage. If it is SF, partnering with management company is not necessary.

Yesterday, I called up Ronald Jones from Prosperity Bank and his general terms are 20%-25% down and 15 yrs amortization. He was very easy to talk to and work with. When it comes to partnership, he has the same requirement when it comes to multi-family and single-family. He cares about the debt to income ratio but as long as I can prove that the rental property is already leased out, he can count the potential rental income as income and doesn’t have to wait for 2 years for the rental income to be in my annual tax return. This is very important. Big banks will nornmally require that the rental income are in the tax retune for 2 years before they count that as income. As you can see mathematically, if I take on debt to buy property and pay debt service, I can easily hit the 43% debt to income ratio if the bank doesn’t count the potential rental income. And once I hit 43% debt to income, bank stops lending. Don’t’ get there.

One I want to quickly mention is Pentagon Federal Credit Union which I wrote about in prior posts. They offer 30 yrs amortization but balloon at 10th year.

Below are the general terms they offer

• For home purchase or refinancing
• Loan amounts up to $417,000
• 75% LTV/ 70% LTV MI & FL. LTV over 70% requires a .5% Loan Level Pricing Adjustment
• Free 60-day rate lock
• 1% Origination Fee

Pentagon offer “FIXED RATE” investment property for up to 10 properties. Pretty nice.

Rate Points APR 4.250% 1.000 4.602% 4.125% 1.750 4.579% 4.000%3.0004.626%

With that, I hope you find it useful especially if you live in Houston or Texas.