Lost loan on quad & need help on options

Flipper/Rehabber · Pittsburgh · Member since 2018 · 6k+ posts · 5k+ votes

1y

standard disclaimer / caution that you shouldn't go through with this if it will strain you financially just to "do a deal."

i guess here are some miscellaneous thoughts on what you proposed as the options

1. a securities backed loan - is that something backed by your stock portfolio? i don't see how this could possibly have better terms than a DSCR loan.

2. definitely do not do this... cannot possible be worth liquidating your stocks, paying capital gains, etc.

3. it won't make sense to "refinance in 6 months" unless you've significantly improved the value of the property. going from DSCR to conventional just to save 1% won't be worth the closing costs you would pay.

is this on market or off? is there the opportunity for value add, or are you just buying hoping to be able to increase rents? it will likely still be valued based on comps in the future so even if you get fantastic MTR rents that won't help you on a refinance, especially if you're paying retail / market on the purchase...

hope this helps you think through it

5 Reply

Emily B.

OP

Member since 2024 · 21 posts · 6 votes

1y

It does, thanks. To answer your question, I got it on MLS and there's not a lot of room for value add.

Sounds like I need to suck it up and take the high DSCR rate or maybe buy down points (?) Closing costs are 20k, so you're right, refinancing soon doesn't make sense. I don't see rates going down significantly, so that might not be an option for a long time. I wish there was some other option I'm not thinking about...

0 Reply

Doug Smith

Lender · Tampa, FL · Member since 2013 · 2k+ posts · 2k+ votes

1y

I was a banker, much of that time in private client for Wachovia, for a very long time prior to doing this now. I did a ton of securities-backed loans. It might work for a bit, but if there's a major dip in the stock market and the value drops significantly, the might have to liquidate some of them to meet the covenant discussing proper margin. The DSCR is pretty straight forward, but it's a different type of loan that will likely require an extension. I have no idea how much you've got in your securities portfolio, but ask your loan officer if "asset depletion" is an option. Asset Depletion allows them to look at your stocks, bank accounts, etc and apply a formula to those assets to count as your "income"...basically if you couldn't pay, do you have enough financial assets to make the payments. Ask them about "Asset Depletion". If your loan officer doesn't know what that is, find another loan officer. Good luck with this deal. It sounds like you'll be fine if all parties cooperate. You do have options.

1 Reply

Emily B.

OP

Member since 2024 · 21 posts · 6 votes

1y

Thanks Doug. I'll definitely ask my lender about an asset depletion loan.

0 Reply

Dan H.Pro Member

Investor · Poway, CA · Member since 2015 · 7k+ posts · 8k+ votes

1y

Quote from @Emily B.:

My husband lost his job 2 weeks ago and it was his W2 we were using for the loan (30yr at 6.625 percent). We were supposed to close on Tuesday but on Friday afternoon I got a call from my loan officer that the underwriters had found out. (His job officially stops May 28th so we assumed there was no way the they'd know about it.)

I really don't want to give up the property. It's a quad and there are four tenants paying under market rent. Our plan was to get those tenants out, do some light improvements and then rent two out at the market rate of $1500 a month and turn the other two into MTRs at $2400.

To save the deal, I have a couple of options (I know about):
1) Do a securities backed loan and then refinance into a conventional mortgage asap when he gets a new job

2) Liquidate our stocks and tap into our cash reserves and pay cash and then do a cash out refinance when rates are better (which I doubt will be anytime soon)

3) Do a DSCR loan at 7.725 percent with 30 percent down and then refinance in 6 months or whenever he gets a job.

What should I do? Are there other options I'm not thinking about?

Thanks so much for the help!

If you can get margin at the same rates I can, the margin is the cheapest option. It is also the most risky. I this chaotic environment, I would avoid this option.

I wound not consider an unleveraged purchase in this environment. Cash flow is insufficient to produce a decent return without a value add to add to the return. Leveraged appreciation is required to achieve a worthy return if he is no value add.

This leaves the DSCR option. My last DSCR loan qualification was so easy and was fairly competitive with a conventional residential rates. As for buying down rates, I calculate how long it would take for the lower payment to recover the buy down. Historically it has not been worth buying down the rate. However my last DSCR loan, I chose to buy down the rate after determining it would not take long to recover the buy down.

Good luck

1 Reply

Emily B.
OP
Member since 2024 · 21 posts · 6 votes
1y
Quote from @Dan H.:

Quote from @Emily B.:

My husband lost his job 2 weeks ago and it was his W2 we were using for the loan (30yr at 6.625 percent). We were supposed to close on Tuesday but on Friday afternoon I got a call from my loan officer that the underwriters had found out. (His job officially stops May 28th so we assumed there was no way the they'd know about it.)
I really don't want to give up the property. It's a quad and there are four tenants paying under market rent. Our plan was to get those tenants out, do some light improvements and then rent two out at the market rate of $1500 a month and turn the other two into MTRs at $2400.

To save the deal, I have a couple of options (I know about):
1) Do a securities backed loan and then refinance into a conventional mortgage asap when he gets a new job
2) Liquidate our stocks and tap into our cash reserves and pay cash and then do a cash out refinance when rates are better (which I doubt will be anytime soon)
3) Do a DSCR loan at 7.725 percent with 30 percent down and then refinance in 6 months or whenever he gets a job.
What should I do? Are there other options I'm not thinking about?
Thanks so much for the help!

If you can get margin at the same rates I can, the margin is the cheapest option. It is also the most risky. I this chaotic environment, I would avoid this option.
I wound not consider an unleveraged purchase in this environment. Cash flow is insufficient to produce a decent return without a value add to add to the return. Leveraged appreciation is required to achieve a worthy return if he is no value add.
This leaves the DSCR option. My last DSCR loan qualification was so easy and was fairly competitive with a conventional residential rates. As for buying down rates, I calculate how long it would take for the lower payment to recover the buy down. Historically it has not been worth buying down the rate. However my last DSCR loan, I chose to buy down the rate after determining it would not take long to recover the buy down.
Good luck

Thanks Dan. At this point, it looks like DSCR is indeed the best route to take. Sucks about the interest rate though. The seller agreed to extend the contract for 2 weeks so I'm going to spend the next day or two shopping around.
1 Reply

Scott WolfPro Member

Lender · Boca Raton, FL · Member since 2014 · 1k+ posts · 956 votes

1y

Quote from @Emily B.:

My husband lost his job 2 weeks ago and it was his W2 we were using for the loan (30yr at 6.625 percent). We were supposed to close on Tuesday but on Friday afternoon I got a call from my loan officer that the underwriters had found out. (His job officially stops May 28th so we assumed there was no way the they'd know about it.)

I really don't want to give up the property. It's a quad and there are four tenants paying under market rent. Our plan was to get those tenants out, do some light improvements and then rent two out at the market rate of $1500 a month and turn the other two into MTRs at $2400.

To save the deal, I have a couple of options (I know about):
1) Do a securities backed loan and then refinance into a conventional mortgage asap when he gets a new job

2) Liquidate our stocks and tap into our cash reserves and pay cash and then do a cash out refinance when rates are better (which I doubt will be anytime soon)

3) Do a DSCR loan at 7.725 percent with 30 percent down and then refinance in 6 months or whenever he gets a job.

What should I do? Are there other options I'm not thinking about?

Thanks so much for the help!

Hi Emily, would be happy to take a look. We have DSCR products, and depending on cash flow and fico can potentially get you a better rate with 75% LTV. Feel free to reach out.

0 Reply

Steve K.

Realtor · Boulder, CO · Member since 2016 · 3k+ posts · 5k+ votes

1y

Perhaps the seller would consider seller financing?

1 Reply

Emily B.
OP
Member since 2024 · 21 posts · 6 votes
1y
Quote from @Steve K.:

Perhaps the seller would consider seller financing?

I wish! I ran the idea by my agent and he thinks the seller is too old school/conservative/conventional to go for it.
0 Reply

Ko KashiwagiPro Member

Lender · Los Angeles, CA · Member since 2022 · 967 posts · 445 votes

1y

Hi Emily,

How much longer do you have and is the seller willing to extend? Getting a different type of loan on the purchase is probably ideal but it all depends on timing. A lot of DSCR loans take 2.5-3.5 weeks.

310-848-9776

0 Reply

Andrew Zamboroski

Lender · Member since 2021 · 495 posts · 130 votes

1y

Quote from @Emily B.:

My husband lost his job 2 weeks ago and it was his W2 we were using for the loan (30yr at 6.625 percent). We were supposed to close on Tuesday but on Friday afternoon I got a call from my loan officer that the underwriters had found out. (His job officially stops May 28th so we assumed there was no way the they'd know about it.)

I really don't want to give up the property. It's a quad and there are four tenants paying under market rent. Our plan was to get those tenants out, do some light improvements and then rent two out at the market rate of $1500 a month and turn the other two into MTRs at $2400.

To save the deal, I have a couple of options (I know about):
1) Do a securities backed loan and then refinance into a conventional mortgage asap when he gets a new job

2) Liquidate our stocks and tap into our cash reserves and pay cash and then do a cash out refinance when rates are better (which I doubt will be anytime soon)

3) Do a DSCR loan at 7.725 percent with 30 percent down and then refinance in 6 months or whenever he gets a job.

What should I do? Are there other options I'm not thinking about?

Thanks so much for the help!

Hi Emily,

Depending on factors like FICO and DSCR, you can likely do lower on a DSCR loan. At 70% on a purchase with great qualifications, 6’a are not unattainable.

happy to chat to see if we can help.

0 Reply

Andrew Zamboroski
Lender · Member since 2021 · 495 posts · 130 votes
1y
Quote from @Andrew Zamboroski:

Quote from @Emily B.:

My husband lost his job 2 weeks ago and it was his W2 we were using for the loan (30yr at 6.625 percent). We were supposed to close on Tuesday but on Friday afternoon I got a call from my loan officer that the underwriters had found out. (His job officially stops May 28th so we assumed there was no way the they'd know about it.)
I really don't want to give up the property. It's a quad and there are four tenants paying under market rent. Our plan was to get those tenants out, do some light improvements and then rent two out at the market rate of $1500 a month and turn the other two into MTRs at $2400.

To save the deal, I have a couple of options (I know about):
1) Do a securities backed loan and then refinance into a conventional mortgage asap when he gets a new job
2) Liquidate our stocks and tap into our cash reserves and pay cash and then do a cash out refinance when rates are better (which I doubt will be anytime soon)
3) Do a DSCR loan at 7.725 percent with 30 percent down and then refinance in 6 months or whenever he gets a job.
What should I do? Are there other options I'm not thinking about?
Thanks so much for the help!

Hi Emily,

Depending on factors like FICO and DSCR, you can likely do lower on a DSCR loan. At 70% on a purchase with great qualifications, 6’a are not unattainable.

happy to chat to see if we can help.
Also, sorry to hear about your husbands job. Wishing you a quick pick up!
0 Reply

Zach Edelman

Lender · New York, NY · Member since 2022 · 1k+ posts · 1k+ votes

1y

Can also do a hard money loan and cover the improvements. DSCR loans likely will have prepayment penalties as well. We can offer both (DSCR and hard money) if you need options!

0 Reply

Christian Maluo

Real Estate Broker · Portland, OR · Member since 2025 · 81 posts · 43 votes

1y

Unrelated, but related. In my city (Portland), you can not easily get tenants out. Especially if they have been in place more than a year. Just making sure you can legally get them out to suit your plans. Good luck!

0 Reply

Chris SeveneyBusiness Member

Moderator

Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes

1y

Quote from @Emily B.:

My husband lost his job 2 weeks ago and it was his W2 we were using for the loan (30yr at 6.625 percent). We were supposed to close on Tuesday but on Friday afternoon I got a call from my loan officer that the underwriters had found out. (His job officially stops May 28th so we assumed there was no way the they'd know about it.)

I really don't want to give up the property. It's a quad and there are four tenants paying under market rent. Our plan was to get those tenants out, do some light improvements and then rent two out at the market rate of $1500 a month and turn the other two into MTRs at $2400.

To save the deal, I have a couple of options (I know about):
1) Do a securities backed loan and then refinance into a conventional mortgage asap when he gets a new job

2) Liquidate our stocks and tap into our cash reserves and pay cash and then do a cash out refinance when rates are better (which I doubt will be anytime soon)

3) Do a DSCR loan at 7.725 percent with 30 percent down and then refinance in 6 months or whenever he gets a job.

What should I do? Are there other options I'm not thinking about?

Thanks so much for the help!

DSCR could be done, but you want one with no prepayment penalty and the rate may be over 8 with no prepayment penalty. DSCR could be the way to go on this but it would take 2-3 weeks to get it underwritten. I would atleast get a 1 year prepayment as that can assist and is a lot better than no prepayment.

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Lost loan on quad & need help on options

Lost loan on quad & need help on options

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