Real Estate Investor · Steamboat, CO · Member since 2010 · 295 posts · 34 votes
I've been in a long haul on a smaller multi-family rehab and watched the rates almost double.
I still have a 1.2 DSCR as it was a strong buy but am finishing with very little monies in the pocket. I will have $350K+ in equity with taking $100K or so in cash-out at close. I"m finishing the project with very little left and lenders still want to see bank statements even though the loan is property-based. I"m told I can use the proceeds of the refi as my 6 months reserves.
What will lenders be looking for in my bank statements. A potential lender said they are just looking to see that there are no NSF checks written but I didn't fall off a turnip truck yesterday. What are they more likely looking for?
I've had to increase the scope of the work and decrease the finances to do so. I didn't think that bank statements were needed on DSCR's at all but it appears that I'm incorrect.
Lender · Nationwide · Member since 2021 · 220 posts · 105 votes
3y
@Burt L. this is definitely one of the factors you will need to discuss with your lender, as it depends. Some sources will allow for 100% of proceeds, others will allow for 10% of proceeds to count towards liquidity reserves. Outside of that usually large deposits anywhere from $20,000-$50,000+ (lender dependent) may require a letter of explanation.
If you have any questions or need templates feel free to reach out.
Lender · Nationwide · Member since 2021 · 220 posts · 105 votes
3y
@Burt L. this is definitely one of the factors you will need to discuss with your lender, as it depends. Some sources will allow for 100% of proceeds, others will allow for 10% of proceeds to count towards liquidity reserves. Outside of that usually large deposits anywhere from $20,000-$50,000+ (lender dependent) may require a letter of explanation.
If you have any questions or need templates feel free to reach out.
Lender · Phoenix, AZ · Member since 2021 · 451 posts · 287 votes
3y
Hi Burt, If they are asking for 2 months bank statements that is normal. Nearly every loan file needs to show "assets". They probably aren't digging into each line item. The only questions they may have are if you have very large deposits that look like gifted funds. Gifts aren't allowed for many investment products. However, if they are asking for 12 or 24 months bank statements then they are likely using a Bank Statement products and not a DSCR product.
I would recommend having an open conversation with your lender. They should be able to explain exactly what they need from you and why!
Lender · Austin Texas · Member since 2022 · 319 posts · 156 votes
3y
Requesting assets is normal - I typically check to make sure balance is sufficient, but it sounds for this purpose the cash out will cover the reserves. They need the statements as part of UW as it is likely a requirement of the servicer that will buy the loan.
Lender · Los Angeles · Member since 2022 · 16 posts · 4 votes
3y
For my institution, the one month of bank statement is to just demonstrate an account where the cash-out will be deposited for the reserves. Yes, if we do see NSF fees that would require a letter of explanation but it's not necessary a deal breaker.
I've been in a long haul on a smaller multi-family rehab and watched the rates almost double.
I still have a 1.2 DSCR as it was a strong buy but am finishing with very little monies in the pocket. I will have $350K+ in equity with taking $100K or so in cash-out at close. I"m finishing the project with very little left and lenders still want to see bank statements even though the loan is property-based. I"m told I can use the proceeds of the refi as my 6 months reserves.
What will lenders be looking for in my bank statements. A potential lender said they are just looking to see that there are no NSF checks written but I didn't fall off a turnip truck yesterday. What are they more likely looking for?
I've had to increase the scope of the work and decrease the finances to do so. I didn't think that bank statements were needed on DSCR's at all but it appears that I'm incorrect.
Many thanks for your input.
Your loan proceeds can be used for reserves, but almost every lender we use still requires to see 2 month's of bank statements. Generally they're looking for money management (no or very few NSF's and large deposits).
If you don't have a lot in the bank after the renovation and you're getting significant cash out, there should not be an issue. If the property is fully leased, they'll use the income from the tenants for the DSCR number and if it's not, with a reduced LTV, they'll use the comparable rents.