I plan on using both a substantial HELOC as well as a commercial loan (likely Freddie Mac or Fannie Mae) to purchase a multifamily.
Ballpark, I'm looking at the following:
$4.5M = Purchase Price
$1.5M = Cash & Investments to be Sold
$0.5M = HELOC
$2.5M = Commercial Loan
My question is whether or not Freddie Mac would include the monthly payment on the HELOC in the calculation of my DSCR ratio. Secondly, if they do, would I be better off taking out the HELOC 3 months early to "age" it in my investment accounts that way the HELOC loan is not considered as funds used for the purchase, but rather just an already existing loan on my primary residence.
@Michael M. - To answer you question, Freddie wouldn't include the HELOC in the calculation of your DSCR ratio. However, they will require a Net Worth equal to the loan amount and Liquidity totaling 9 months of the debt service of that loan. The NW and Liquidity requirements are calculated based on the combination of the personal financials of all investors included in that purchase.
Feel free to message me with any further questions on Freddie SBL.
Thanks for the quick answer Tom.
@Michael M. No problem at all, I work with Freddie on a daily basis and finance deals with the Freddie SBL program frequently.
Fee free to message me should you have any other questions on the program or pricing for your purchase.
Tom already hit the nail on the head on the net worth and liquidity requirements. But just to take an opportunist view, you can make it work with an equity partner of sufficient financial strength, or you can go with a balance sheet lender here like a bank or credit union, whose underwriting requirements can be more or less strict on a case by case basis. Are you buying in Connecticut?