Lender · Los Angeles, CA · Member since 2017 · 916 posts · 647 votes
We are in some unsettling times and many of you have questions about financing options available for investors. Others have questions about the lingo/structure of RE financing. Opening up this forum to send me all you questions you have. I'll do my best to answer all questions submitted here.
if I have a four unit rental property which I buy for cash, rehab and get fully rented out - is there any minimum time I need to hold before a conventional bank will refi? Thanks
Are you asking if you can borrow when unemployed are you are concerned about having a gap in employment for an upcoming purchase?
If you are in a purchase transaction for a full document loan, The employment verification requirements RIGHT NOW are tightening. As in lenders are checking three to four times during the loan process to confirm employment. If you start a loan process right now and are furloughed/under employed/unemployed it will be tougher than if you started a loan a month ago. Every day new conditions come out regards verification of employment and change per lender. If you can wait, Id suggest you do so until we get some clarity.
If you have a specific scenario, I can be more helpful but short answer is, we are all in this and lenders are adapting as this pandemic unfolds.
Are you looking to pull cash out of ALL of the properties? If so, a blanket loan can be done encompassing all the properties under one loan if you are 50% or below LTV. Most blanket loans I've brokered are looking to max out the LTV and that can be expensive in both rate and points, because it is riskier and harder to underwrite. Being that lenders are tightening their belts, conservative loans are more likely to be approved. It also depends on what you are looking to do. Is it to have cash to renovate, or to be ready to buy more RE in the coming months?
Send me a few more details and I can better guide you. Don't be discouraged about blanket loans, costs are relative to risk.
Rental Property Investor · Member since 2018 · 46 posts · 11 votes
6y
FHA loan,
new debt to income ratio banks look for since coronavirus? I saw 50%. But I also saw this isn't a strict number and can move based on a few factors? Such as cash reserves and monthly income left over from rents? What else can help?
I am meant to be qualifying myself based on rental income of 20 units I own, to buy and live in a four unit close to all my properties, but I think its tight. It has been with underwriting for a few days.
Any suggestions on extra things that could help right now, I have a pretty good relationship with my lender, he's done a lot of deals with me and keeps trying to assure me we will get this done.
My name is Henry and I'm considering doing a short sale on my house. My question is whether going through my mortgage bank is the better bet than short sale with an outside company?
Rental income for RE investors are in danger of not being counted due to the forbearance surge and rent strikes happening. This debate changes DAILY and I cannot answer with any confidence here. The best thing right now is cash in hand. You are correct that DTI requirements are changing. I have seen only 50% of rents collected counting toward loan prequals so... its a turbulent time. The fact you have a good relationship and you are an experienced investor helps but unfortunately I can't say for sure about your situation.
Rental Property Investor · Member since 2018 · 46 posts · 11 votes
6y
Appreciate the fast response!
Just so I'm understanding this correctly. If my gross income were 40,000 a month from rentals based off current leases. And my expenses were 10,000 a month.
They would only count 20,000 of that income. And from this my DTI ratio would be right on 50%? 20,000 income, 10,000 debt?
Or if a payment is 1800 and 500 is principal, does the 500 go towards "debt" or "income"?
Bridgeport, CT · Member since 2017 · 116 posts · 19 votes
6y
@Jonathan Taylor
Hi Jonathan, I was debating if I should do cash out refi or heloc on my current 2-family investment property. The market value is about $500,000 with mortgage balance $315,000 (current interest rate is 4.4% with $50 PMI)I have good credit 740 up. My purpose of getting cash out is to use it as down payment to pay for my next Brrrr as primary property (hope for FHA loan). There are both pros and cons between Cash out refi and Heloc. Which way would it be better for my situation? Thank you very much!
DTI means your debt to income ratio. If you make 40,000, your debt is 10,000, then you are at 25% DTI based solely on the example you provided.
A major consideration though is DTI calculations vary depending the lender and the current RE landscape but the calculation is done based on your TOTAL debt. Credit card debt, Car Loans, student loans, any debt that reports to the credit bureaus. The entire financial picture is analyzed not just your rental operations.
First, why are you paying PMI when this property is at 63% LTV? You've passed the 20% equity so you shouldn't be paying PMI unless there is a mistake in the numbers. Id look at your current loan first before considering a HELOC because if you can Refi and get better rates
Second, Current RE lending markets are changing daily so loan programs available today may not be available tomorrow. HELOCs are easier to obtain from banks you have existing relationships with and CAN offer favorable terms but again, what I say today could be different tomorrow.
Thirdly, Some investor lenders are limiting LTV to 60-65%. Some, not all, but that wouldnt allow you much cash out.
Lender · Los Angeles, CA · Member since 2017 · 916 posts · 647 votes
6y
@Farris Gosea There are bank statement loans, also called lite doc options that look at your deposits, credit score, schedule of real estate and experience to qualify you. LTV and cash out requirements for these loans have tightened but that doesn't make it impossible. You're in a good position.
@Farris Gosea There are bank statement loans, also called lite doc options that look at your deposits, credit score, schedule of real estate and experience to qualify you. LTV and cash out requirements for these loans have tightened but that doesn't make it impossible. You're in a good position.
Appreciate all the efforts with these answers and quick responses. Your the best!!
Last question is. Are those available with an FHA loan?
Bridgeport, CT · Member since 2017 · 116 posts · 19 votes
6y
@Jonathan Taylor
Sorry I didn't state that i put down 10% down when I purchased the house in 2017. So I haven't reached 20% yet (bought at $365,000). HELOC is easy to get but if I use it to fund my next purchase down payment, That means I would have to keep paying HELOC interest (about 5% with the lender I talked to) so I would pay Heloc interest plus potential new loan for new purchase whereas with cash out refi I only pay one new loan. Does it make sense? Thank you!
Rental Property Investor · Member since 2019 · 5 posts · 1 vote
6y
@Jonathan Taylor
Okay, I am always open to learning. I own over a hundred units. We typically work with a local commercial bank and use 15-year loans with a 25-year amortization. The rat is generally fixed for the first seven years and then floats with prime. I generally put down 25% or have the seller subordinate a second mortgage to help reduce my cash down payment. So, what should I be doing? Are there special programs I am missing. I see some people use FHA loans. Help me improve my financing mechanism.
Rock Hill, SC · Member since 2015 · 104 posts · 209 votes
6y
@Jonathan Taylor
I’m looking to sell my primary where I have house hacked (collected rent and reported on taxes) for about five years. I want to buy a bigger property and rent out the units. Do you know if a lender will use estimated rent for the new property since I have been a landlord over two years or will it not if I sell my current house?
Specialist · Phoenix, AZ · Member since 2020 · 7 posts · 0 votes
6y
@Jonathan Taylor
Hi Jonathan, I'm a new RE investor currently looking for my first property and I have some financing questions that if answered may help ease my mind on a few things.
Is there a certain amount of time that someone should wait between aquiring loans?
My wife and I would like to flip a house and then use the profit for a downpayment on a duplex. Can these be done back to back?
Also what would be a good method in your opinion for financing that first flip if we dont really have 3-5% to put down?
Thats an impressive portfolio. The 7/1 ARM is popular as it fits with a lot of my client's needs but the question I always ask to give you the best options is, what are you trying to do with the loan product? Fix and hold? Value add and sell? Refi? Cash out? The fact that you have an existing portfolio helps because we can leverage your experience and equity to get you better rates and terms. If you have a specific need, DM me and I can run a few options based on what you provide.
The lending industry is tightening and the products available TODAY may be different from next week but as we all know, this is cyclical and the products in some form will return as lenders start to re open their doors.
Lender · Los Angeles, CA · Member since 2017 · 916 posts · 647 votes
6y
@Peace Lily If you bought at 365k but have about 340 ish in equity but it is worth 500k, you can refi at 75% LTV but it wont give you enough cash for a downpayment. 75% of 500k is 375k.
For a HELOC, then yes you would have a few loans and if the numbers pencil out, meaning the debts you have against your new property are covered by the rents received and you have a seasoning period of 3-6 months, you can refinance the new property to pay off your HELOC and initial loan.
If you want me to give you a more in depth overview, PM me and I can show you some options that are available.