All Forum Posts by: Austin Clarence

 Hi Taz, is it a mobile home park or a single manufactured home? Is it single wide or double wide? All of these components will make a big impact on how and if it can be financed.

Once I hear back I can elaborate on what your options would be for financing

 I have had great success for 4+ years using Zillow. Its free for owners and you can see the credit report and background check. The applicant pays a small fee but they can apply to countless properties within a 30 day period. 

Hi Jade-Without the 2 year work history you may want to look at a DSCR loan. With a DSCR mortgage the lender will do a credit check, but the main underwriting will be on the property you are looking to purchase and how much the property will rent for. The general rule is you want to be at a 100% ratio of Rent/Mortgage. So if you are buying a house with a $3000 mortgage you would want there to be at least $3000 in monthly rental income to get approved.

The rental income is determined by an appraiser, who will complete their fair market rental value of the house. With a good realtor and loan officer you will already have a good idea and tight range of what the house will rent for by looking at rental comps.

DSCR loans typically require 20% down or more. 15% is a possibility also. But its easier to get the 100% ratio when there is a bigger down payment and therefore a smaller mortgage payment. I hope this helps.

Hi Gabriel-The good news is Conventional is not as strict as FHA loans are for student loans. With FHA it requires 1% of the balance into the DTI equation. Conventional is .5% typically.

OR with a DSCR loan none of your personal income or debt is even evaluated. Please let me know if you have any other questions

The game plan will be fairly different depending on if you are trying to qualify with Conventional financing vs DSCR. Conventional will offer better terms but more paperwork, income qualifying etc.

With DSCR loans other than your credit score, the main piece of underwriting is property driven. What the house will rent for will be the main piece that will determine your eligibility. A good loan officer will look at rental comps with you and the realtor to make sure its priced out correctly up front and the right loan program is selected. With DSCR the lender should propose a back up plan in case the rents come in low on the appraisal. Let me know if you have any other questions!

Hi Ari, there are about 5 lenders I am aware of that do not have prepayment penalties. A loan program that has a 5 year prepayment (Which is usually the max) will almost always have better pricing than a loan with no prepayment. However, DSCR pricing can vary heavily from lender to lender. Please let me know if you have any questions

If you can qualify with Conventional financing (With your income) this would yield the most attractive loan terms. Usually investors start with Conventional financing then eventually pivot to DSCR loans for subsequent investments.

This is because the more properties you acquire the more documentation you will need to provide to the lender. Conventional loans will always have more documentation than DSCR loans.

With a DSCR loan the lender will look at your credit score, but no income qualifying is needed. The lender will usually ask for a 1 to 1 ratio of the Rent/Mortgage Payment + HOA. So all the underwriting is essentially done after the appraisal is back which tells you the appraiser's fair market rent opinion.

A lot of the investors I work with will use DSCR and never go back to Conventional because they are hassle free, relative to Conventional which requires income evaluation, etc.

The biggest downside is HELOCs are typically adjustable rate mortgages. They are also often ARMS so after the first few years of the fixed rate period is up the payment usually adjusts up. 

There are some HELOC options that do offer fixed rates and the process has improved enormously over the years to get HELOCS. There are even options that do not require an appraisal and you get the money within days.

I would do some budgeting with your husband and take a look at where your incomes are and where you expect them to be in the years to come. Then also look at the HELOC payment numbers to ensure that new, additional payment will not be pushing your limit and wallet.

The advantage to keeping the HELOC secured by your rental property is you may be able to write off the mortgage interest on your Schedule E of your taxes. I am a lender not a tax professional so I will stay in my lane but if you have more specific HELOC questions I am happy to answer.

Tim-That's exciting. You will learn a lot from your first transaction then feel much more confident for future transactions. As you build relationships and trusted contacts it will only become more seamless.

Assuming the properties you are looking to invest in will be rehabs, you will likely start with a hard money loan. 10%-20% is a unusually the minimum down payment. The underwriting by the lender is mainly built off the subject property itself. Lenders usually give more attractive loan terms and smaller down payments to repeat investors, which you will become later. 

If the property does not need rehab, then you can look at a DSCR (Debt Service Coverage Ratio) loan. The lender will do a credit check but will not look at your personal income, there will not be much paperwork required. As long as the monthly rent off-sets the mortgage payment and your credit checks out you will be good. Lenders sometime ask for "reserves" or to see you have cash aside to make your first few mortgage payments. Down payments usually run from 15%-25%.

Please let me know if you have any other questions about the financing components.