Newbie to Real Estate & Learning Loans
Hi All,
I just heard back from a broker that was recommended by a realtor that:
"I've heard back from a few lenders and none of them will allow a fix n flip without any experience . They used to, but have tightened up guidelines apparently. You either have to have had one under your belt and I had one lender tell me they require 3 years of experience. With this being said, I would consider a DSCR (Debt Service Coverage Ratio) loan,
Here are some specifics on the DSCR program:
- They want to see the rent cover the payment, like a 1 to 1 ratio. We would get a rent schedule with the appraisal that will reference the going rent.
- 20% down with a 660 credit score and up. They will do a lower credit score but will require a higher down payment.
- They will want to see 6 months reserves. Reserves is a month worth of payment, with taxes and insurance included. They will use 60% of what you have vested in a retirement account to go towards this. You do not pay this money to anyone, they just want to confirm you have it.
- You have to currently own a primary residence.
- There is a prepayment penalty and they vary but the most common is 3% of whatever the balance is, will be calculated and added to the payoff if you payoff prior to 3 years."
Does this sound like what other new investors are experiencing?
I really would like to get started & found a great fix & flip deal for my first. If we don't have conventional 20% to put down right now w/o clearing my savings what are some other strategies I should consider that have worked for you?
Would love to connect for some helpful tips & insight as a newbie just dying to start.
Thank you in advance for all advice!