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Joel Diaz De La Rosa
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DSCR Loan- Multiuse Property

Joel Diaz De La Rosa
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Posted Feb 12 2024, 18:06

Does anyone know of a good lender that offers DSCR Loans for a multiuse property in Wisconsin. I'm looking to do a cash out refinance on a 2 unit property. 50% residential/50% commercial. I bought it for $71,000 and is now worth $193,000. The lender that currently approved me seemed overpriced (High Fees & Interest Rate). Attached is a photo of the offer. Is this exaggerated? My credit score around 746.

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Andrew Postell
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Andrew Postell
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Replied Feb 12 2024, 18:41

@Joel Diaz De La Rosa hmm, so the fact that you have ANY 30 year option on a property like this is surprising. But 5% commission with a 5 year pre-pay at 12%+ is a bit much.  

Now, having said that, the most common lenders that can offer something on a property like this would be a smaller, community based bank.  They would likely offer you a 20 year loan with a 5 year renew/adjustable feature.  The rate and fees would be significantly lower.  Now, how would you find a bank that could write a loan like this?  It might take some work but here's what I would suggest:

  1. Visit your local REI groups. There are many groups that meet across the country. Some post here on the Bigger Pockets Marketplace. Many post on meetup.com. Even facebook will have some. Networking is always a great practice and you never know who you might meet there and what good information they have to share. Would certainly recommend visiting if one is close to you and asking other investors in your market who they know that is a smaller, community or local lender.
  2. Calling - and then there's this option. First, when calling banks target the smallest most community based banks you can first. If you have never heard of them, and they have one location - that's a good candidate. No big, national, publicly traded banks will do this loan type. Second, try to ask for  the COMMERCIAL division. That's the section of the bank we want. Now, most of these smaller banks may only have 12 employees or so. So, don't get frustrated if they don't return your call or aren't in the office. Just call back and be friendly. Maybe play dumb a little "I don't know if I'm in the right place..." "I'm sorry to disturb you, you may not be the right person for this....", etc. Maybe someone can get you to the right person. Again, be prepared to call A LOT.

Hope all of that makes sense but hope you find some good options.  Thanks!

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Chad Davis
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Chad Davis
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Replied Feb 13 2024, 06:15

@Joel Diaz De La Rosa with DSCR and multiuse rates tend to be higher but that rate is the equivalent to a hard money loan. Happy to take a look on my end.

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Nick Belsky
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Nick Belsky
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Replied Feb 13 2024, 06:52

@Joel Diaz De La Rosa

I know that lender.  They are a bit pricey.  It is structured with higher fees to remove the PPP.

Either way, the rate is a bit high, but for a 50/50 mixed-use, that is about the going rate currently for a 30 year fixed.  You may be able to get slightly better terms (definitely a lower rate) on a 15 year or 20 year term at a bank or credit union, but the resi/commercial mix will be the hang up for many lenders.  Have you checked with local banks or credit unions?  They will be full doc versus lite doc...

Cheers!

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Austin Clarence
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Austin Clarence
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Replied Feb 13 2024, 07:55
Quote from @Joel Diaz De La Rosa:

Does anyone know of a good lender that offers DSCR Loans for a multiuse property in Wisconsin. I'm looking to do a cash out refinance on a 2 unit property. 50% residential/50% commercial. I bought it for $71,000 and is now worth $193,000. The lender that currently approved me seemed overpriced (High Fees & Interest Rate). Attached is a photo of the offer. Is this exaggerated? My credit score around 746.


 That pricing seems away offer. You should be below 10%. Shoot me a message I can prepare a quote for you in seconds. Thanks

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Rebecca Knox
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Rebecca Knox
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Replied Feb 13 2024, 08:21

There's so many brokers offering DSCR but they all do range in fees....by A LOT.

Recently, I've checked with Dennis Kahn at Homestead Mortgage, Zach Starnes, Eric Wennerstrand/John Haydin and Ethan Brooks. 

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Corina Eufinger
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Corina Eufinger
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Replied Feb 13 2024, 10:10

Zach Starnes is great to work with.  I highly recommend him.

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Jacob Sherman
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Jacob Sherman
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Replied Feb 13 2024, 12:40

What is the credit score ? If its a commercial DSCR products for a 140k look about right now . Please keep in mind for it to qualify for a true mixed use a majority of the squarefootage has to be residential . What is the breakdown of units on this one ?

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Marcus Davis
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Marcus Davis
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Replied Feb 13 2024, 12:51

Joel, that is very expensive. I think I can get this done for you or at least get to the bottom of a better option quickly for you.  I would anticipate a total of 2pts fees including broker (me) and our conventional lender.  Send me a email and I can follow up with needed items to quote for you. 

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Erik Estrada
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Erik Estrada
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Replied Feb 13 2024, 16:33
Quote from @Joel Diaz De La Rosa:

Does anyone know of a good lender that offers DSCR Loans for a multiuse property in Wisconsin. I'm looking to do a cash out refinance on a 2 unit property. 50% residential/50% commercial. I bought it for $71,000 and is now worth $193,000. The lender that currently approved me seemed overpriced (High Fees & Interest Rate). Attached is a photo of the offer. Is this exaggerated? My credit score around 746.


The problem is many DSCR lenders do not finance these property types. There are a handful, however they charge a premium.

Do not get strung along with any broker or lender promising nice terms on this property type. Make sure you ask all the right questions or risk paying a heft appraisal fee with no loan closed. 

Since the make is 50/50, you will need to finance this with a local commercial bank or a non-traditional commercial lender. It may be best to go local on this, but if it's simply not possible, try a non-traditional commercial lender.

Are both units occupied or vacant?  What is the commercial use? 

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Kerry Noble Jr
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Kerry Noble Jr
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Replied Feb 14 2024, 12:46

@Jayson Cain

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Stephanie P.
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Stephanie P.
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Replied Feb 22 2024, 15:50
Quote from @Joel Diaz De La Rosa:

Does anyone know of a good lender that offers DSCR Loans for a multiuse property in Wisconsin. I'm looking to do a cash out refinance on a 2 unit property. 50% residential/50% commercial. I bought it for $71,000 and is now worth $193,000. The lender that currently approved me seemed overpriced (High Fees & Interest Rate). Attached is a photo of the offer. Is this exaggerated? My credit score around 746.


 Your rate should be 11.24 on a purchase with 2 points max.

Your appraisal costs, environmental fee and underwriting fees quoted are correct.

It's a mixed use property with no income from the borrower.  It's going to be expensive.  Just hope they can find comps (make sure to ask them to check BEFORE you order the appraisal).