Duplex lending standards
I am financing a duplex. The lender wants top of market rates and will only lend to 60% of appraised value. Is this common?
Providing more information will let everyone help you better. What type of loan or you looking at? Where is the property? How does it cashflow?
Conventional 15-year loan. The property was purchased with cash. Complete gut. New plumbing, electrical, roof, insulation, the works all done correctly with quality materials. Already rented pending final inspection. Rental income $3400 per month.
Typically lenders will take 75% of the appraised income and count that towards your debt to income ratio.
less then 6-12m seasoning? small loan amount? credit score?
Should appraise for 550-600k. Credit score 770. No seasoning. Loan amount desired 420k.
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Quote from @Tim Parker:
I am financing a duplex. The lender wants top of market rates and will only lend to 60% of appraised value. Is this common?
No common - you can still get a DSCR loan for this type of property (assuming its non-owner occupied) at 80% of appraised value (fair warning - rates/points will likely be high)
It'll probably cashflow a lot better with a 30 year DSCR loan. Rates everywhere have gone up but with your credit score the rates for a DSCR wont be that much higher than a conventional. I have been seeing them for 80% LTV if it cash flows properly at that leverage.
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Quote from @Tim Parker:
Should appraise for 550-600k. Credit score 770. No seasoning. Loan amount desired 420k.
@Tim Parker When did you buy the property? That can effect what you can borrow on a conventional loan and some DSCR products.
11/2020
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11/2020
@Tim Parker Unless the 60% loan to value just happens to be the most your debt to income ratio/DCSR (which ever approach you are using) can qualify for then that does not make sense. Any program that I have will lend higher then 60% loan to value on a non-owner occupied duplex. The exact amount you could go up to would depend on the program but should be more then 60%.
@Tim Parker It sounds like you are looking to do a cash out refi on a 2 family house that you purchased with cash well over 6 months ago. Most lenders will want to conform with Fannie/Freddie guidelines, which will put the max LTV at 70% for a cash out refi, investor loan. I would say that 60% LTV is low. Having done a few of these exact types of loans (I use 30 year fixed rate loans), I will say that 70% is what I have always got. I would talk to other lenders.
I will say that most of by cash out refi's have had sort of low appraisal valuations. They appraiser seems to always put a low value on it since there is no sales price of existing mortgage to base the value on (yeah, I know these things are not supposed to affect the number, but it always seem to).
Rates are typically 1-1.5% higher than the normal mortgage rates (due to it being a cash out plus investor loan). Currently if I was doing one, I would expect that the interest rate would be 7-8% for a 30 year loan. This assumes the loan is in your personal name and you dont have DTI or credit issues.
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Quote from @Tim Parker:
I am financing a duplex. The lender wants top of market rates and will only lend to 60% of appraised value. Is this common?
80% for DSCR is where you should be. Walk away from this particular lender/broker if their max is 60% ltv, UNLESS the rents aren't high enough to get you at least a .75% DSCR. That's really the only explanation for such a low ltv.
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Quote from @Tim Parker:
I am financing a duplex. The lender wants top of market rates and will only lend to 60% of appraised value. Is this common?
Is it owner occupied or fully investment?
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