Lenders only wanting to lend 80% of purchase?

Question

I keep running into a road block. I am on my first BRRRR and the issue is lenders keep only wanting to lend on 80% of the purchase price and not the actual appraised value, which would keep my money tied up on the rehab portion as well as 20% of the purchase price. Is there a way to get the 80% of the appraised value out? Is BRRRR dead with institutional lenders? Or am I missing something?

My personal credit score is a 780 and I have multiple other properties but still not busting the DTI metric.

Matthew Crivelli · Answer

Non-QM DSCR loans will allow you to refinance the property at the newly appraised value after 90 days from the original purchase IF you took a loan for the initial acquisition. IF you bought the property with cash, you typically have to wait 6 months from the original purchase date. The few lenders that offer no seasoning, they typically make you pay for it in high rates / fees. Typically it's better to let it season.

On the FHA side, they want you to wait 12 months.

Patrick Roberts · Answer

For a purchase, the loan will almost always be based on the lower of either the purchase price or the appraised value. For Conventional cashout refi, you need 12 months seasoning. For DSCR and other commercial options, it will vary by lender - there are literally thousands of them and they're all slightly different. Most will want 3-6 months seasoning, and there will by slightly nuanced differences between credit boxes for most of them.

Andre Brock · Answer

Yes I agree with Sofia as someone who has done delayed financing I agree because 80% ltv is what we are used to dealing with when it comes to lenders.

Jay Hurst · Answer

@Samuel Coronado

We have a 2 step program that we fund out of balance sheet that allows you to pull out cash before 12 months, and then refi into a conventional loan. You get the best of both worlds in that way: No seasoning to pull cash out AND the conventional rate/costs and no pre-payment penalty which are all better then DSCR loans.

Erik Estrada · Answer

Most lenders are going to lend based on the lower of the purchase price or appraised value.

If the property needs rehab, you might be able to do a fix and flip loan at 90% of the PP and 100% of the rehab, depending on your experience, LTARV, and credit

Sofia Komrskova · Answer

Sounds like they are trying to offer you delayed financing QM loans. You need to wait for seasoning to do cash outs(I think it's up to 12 months now) or find a DSCR lender instead.

Mike Klarman · Answer

I'm more curious about the lenders you do have that will do it. Manufactured is tough and so are trailers.

Rick Albert · Answer

If you typically wait 6 months, then they will lend 80% of the appraised value. That's what I had to do.

Deborah Wodell · Answer

Yeah, being a manufactured home does limit lender options, but there are still possibilities. I’d be happy to take a look and see what we can get for you. Based on similar deals I’ve worked on, the quotes you’ve received so far seem pretty standard.

Samuel Coronado · Answer

Let's run it.

Lenders only wanting to lend 80% of purchase?

Lenders only wanting to lend 80% of purchase?

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