How Refinance out of a Hard Money Loan

Question

So I just used a Hard Money Loan with a 10% interest rate it's a five-year duration. I had to use Hard money loan because I don't have work history to get a conventional loan how long do I usually have to show employment until I can Refinance into a conventional loan with a better interest rate? There was $120,000 Equity built into the deal because I got it for such a good price, and the goal is to keep it as a short-term rental property. It's my first property, and I don't know if I should fix and flip it or should I stick it out till I can refinance. How does one come to a conclusion?

Robin Simon · Answer

You are going to want a "DSCR Loan" with a private lender that specializes in short-term rentals. Most lenders will want to see if leased up with a long-term tenant before doing a cash-out refinance, but some will allow the refinance w/o a lease if you are planning to make it a short term rental

Robin Simon · Answer

I'd be careful with banks and credit unions if you are dead-set on going the STR route, a lot are not as comfortable or creative on financing projected STR income as private lenders

Lien Vuong · Answer

You can refi into the DSCR as aforementioned or you can try for the second home loan with good income coming in.

John Underwood · Answer

Start talking to multiple mortgage brokers now, try smaller banks and credit unions. They tend to hold their loans in house and can be more flexible.

Steven Foster Wilson · Answer

I agree with Reid, you have to normally show 2 years of work history. I would also call around to as many lenders as you can because sometimes they have different ways of making things happen depending on the company.

Stephanie P. · Answer

30K in closing costs is outrageous, even considering escrows.

Reid Chauvin · Answer

@Sammy Abu-hijab - To answer your question about how long you need to show employment to qualify for a Conventional loan; it depends on your current job type. You will have to provide your job history for the past 2 years to your lender, but the length of time is more lenient if you are receiving a salary as a W2 employee (because this is viewed as more stable income). For example: you could have just started your new W2 job a month ago, maybe because you just graduated from school. In that case you can still use that income, since being in school for the previous 23 months satisfies that remaining 2 year employment history. However, if you are a commissioned employee, you will need at least 1 year of history receiving commissions, and if you are self-employed, you will generally need at least 2 years to consider that income (though there can be exceptions where you don't need a full 2 years in certain circumstances).

Jason Regan · Answer

I am having the same type of issue but its because my DTI is super high. I bought a STR in February and of course they can count any of the profit until it goes on the taxes so my DTI is like 80 or something. I am buying two more this year DSCR. There are drawbacks and these tend to have higher rates and crazy closing costs. For example my Gatlinburg buy has 30k in closing costs. Next year I get my DTI back and second home loan option yay!!!

How Refinance out of a Hard Money Loan

How Refinance out of a Hard Money Loan

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