Should I get prequalified for a 30 year if my lender doe

Question

Should I get prequalified for a 30 year mortgage AND hard money loan at the same time if my lender does both hard money loans and 30 year loans?

I’ve talked to a lot of lenders that offer loans for all situations (fix and flip, long term rentals, DSCRs, etc.) Should I rely on these one-stop-shops? I’ve heard in the past that it is difficult to refinance from a hard money loan to a 30-year-mortgage so it’s better to get preapproved for a 30-year-mortgage beforehand. Should I rely on one-stop-shop lenders for this or are there any pitfalls?

Nick Belsky · Answer

@Mike Schorah

DSCR is not a hard money loan.  They are great, long term loans for a lot of investors.  They walk and talk just like a conventional with only a few differences.  As far as one stop shops; I work with more than 40 lenders.  I will say that there are several who excel with one loan type or product over the others they offer.  There are none who are experts at all their products.  None!  I have so many since each is an expert with the particular type of loan or scenario.  For example, the lender I like best for a warehouse line of credit is by no means the best with Fix and Flip, even though the offer it.  The lender who is amazing with Care Facilities is not good with DSCR or Bank Statement loans.  The lender who is an expert with ITIN and Foreign Nationals is not good for anything else, really.  You get the point.  I don't believe in one stop shopping, not when I am working with my clients to find the best loan for their situation... no way.

My advice here is to get quotes from several lenders, even if different brokers if you must.  Compare each loan option you are give and ask for the details of each.  Each lender is backed by an investor.  Each investor makes their own guidelines and rules.  Even though two different lenders offer DSCR loans, that doesn't mean the guidelines are the same for both.  Ask, ask, ask... If the broker/lender is reluctant to disclose, move on.  Don't get caught up in the game of,"oh, take the HML to get you in and you'll refi into a conventional later on".  Total BS.  You are getting played.

Cheers!

Chris Mason · Answer

It's not actually difficult to refinance a HML into a "normal" mortgage. In theory. But here's what happens...

John can't get a normal mortgage because X. So he takes out a HML, with the high rate and high fees. He does absolutely nothing to fix X, and then acts surprised when he - SURPRISE! - still can't get a normal mortgage down the line as a refi.

The basic qualification parameters are almost identical. Refinances don't typically have down payments, because you use the existing equity to check that box. Other than that, if you can't qualify for one, you probably can't qualify for the other.

This should also answer your question. If you can qualify for institutional financing, there's no reason to consider a HML.