Duplex lending standards

[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?

[David Lambert]

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?

[Tim Parker]

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.

[Rick Albert]

Typically lenders will take 75% of the appraised income and count that towards your debt to income ratio.

[Eric Goldman]

less then 6-12m seasoning? small loan amount? credit score?

[Tim Parker]

Should appraise for 550-600k. Credit score 770. No seasoning. Loan amount desired 420k.

[Robin Simon]

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)

[David Lambert]

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.

[Jay Hurst]

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.

[Tim Parker]

11/2020

[Jay Hurst]

Quote from @Tim Parker:

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%. 

[Mike Wood]

@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.

[Stephanie P.]

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.

[Lyndsay Zwirlein]

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?