All the DSCR products I know of are not. What is the specific situation?
We kind of figured. I'm trying to buy my friends house to use as a rental property. I don't have the 20% as I just bought my first rental property in August.
We were hoping he could refinance for 80% keep the cash and transfer the house to my name. It appraised for $80,000, but probably sell around $70,000. After agent fees, he'd end up around $65,000 which is about 80% of the appraised price.
He owns the property outright and I would've payed the closing costs for the refinance.
Are there any other options? I'm trying to convince him to wait another 6 months or so, because I'll have the money then. He just wanting to explore other options to sell faster if possible. Thanks!
@Daniel Vanhala From what I can tell it depends on the specific loan and it's definitely something your friend can check in the original loan docs. What stands out to me is that it seems like it was their primary residence which makes it unlikely it's a DSCR loan, no? Definitely possible, but just not the norm. Another option, though I don't recommend it for either of you, is a "subject-to" acquisition of the property which is basically you taking over their loan payments, but not alerting of such. Its' technically legal from what I've been told (check with a lawyer in your state), but there is a pretty precise science involved to make sure you do it all legally and avoid a due-on-sale-clause from the lender which, albeit unlikely, is happening especially in times like now wherein the interest rate difference between current rates and the loan you might be taking over can be significant. It's still pretty rare, but for the first time I've actually heard of lending following through with the due-on-sale clause (I believe it was SPS or Shellpoint, maybe Fay, that I've received confirmed reports about). DM me if you want more info on the specific steps for the "subject-to" process, but I would first just have your friend check with the original lender/lender docs to see if there's anything in there about it. Hope this helps
@Daniel Vanhala Another option, though I don't recommend it for either of you, is a "subject-to" acquisition of the property which is basically you taking over their loan payments, but not alerting of such. Its' technically legal from what I've been told (check with a lawyer in your state), but there is a pretty precise science involved to make sure you do it all legally and avoid a due-on-sale-clause from the lender which, albeit unlikely, is happening especially in times like now
DSCR are a "Non-Qualified" Mortgage. Which means they don't have to follow strict government regulations to be sold to Fannie/Freddie.
Because they have looser guidelines, its up to the originator of the Loans to include an assumability clause. So potentially any DSCR could be assumable. The issue is getting access to the promissory notes to see if they have such a clause. You would have to ask the current borrower on the note for a copy of the promissory note to see if it has an assumable clause. You can also ask a mortgage broker to ask his network of lenders if they have assumable clauses as boilerplate in their loan products so you can just ask who the originator was and know before searching the Promissory Note.
At the end of the day, you always need to find that assumable clause.