All Forum Posts by: Brittany Minocchi

Like Jason said, anything 5+ is going to be commercial. another thing to add to what he said is that the minimum loan amount goes way up - most lenders want $400k. There are a couple that will go lower than that. Appraisals are more expensive too, somewhere in the neighborhood of $3k and up. An occupancy rate of 70%+ is typically required. 

Investment property and not one you plan to occupy, right? Have you been self employed for at least 2 years? Do you write a lot off on your taxes? That's usually the issue with self employed people, we have to go off of net income. With a co-signer, it would depend on their credit/income/job history as well. If you couldn't get qualified for conventional, you could possibly do a debt service loan. No income/employment/DTI factored in.

Quote from @Bill Hughes:

got it! That clarification was right on the money. Thank you so much Brittany! I'm not so concerned about getting the actual market value out of the property right now as I am just getting my HELOC freed up for more potential investments.
Now if I could just find a bit better rate...  ;-) 

 No problem! Depending on your credit and the whole scenario, you might be able to get into the lower 8s. Happy to chat more if you'd like, feel free to reach out. :) 

Depending on your current rate, you could look at a cash out refinance, HELOC or HELOAN. Cash out refi will replace your current mortgage and it's interest rate, and you'll receive a portion of the equity. HELOC is a second position line of credit allowing draws over a set period of time. Typically these are interest only during the draw period, then fully amortized. A HELOAN is a second position loan, functioning similarly to a cash out refi but it has NO effect on your existing mortgage. These are all viable options to access your equity without selling. You'll get the best rate with the cash out refi, but you should consider your current rate and the rate of a second position product to determine your blended rate.

Not sure if you plan on using FHA or conventional financing, but FHA will require that a 3-4 unit property is self-sufficient, meaning the income from the property will cover 100% of the monthly principal, interest, taxes and insurance. You can use the market rents for the unit you plan to occupy, but only 75% of leases/market rents will be used to qualify. This isn't the case with conventional, but you'll need at least 5% down vs. FHA's 3.5%. Your income will be a factor, as will your DTI, credit and employment history.

Welcome! I’m a lender living in OH and I invest here as well. Happy to connect if you every need anything. Good luck! 

Quote from @Dawn MacMillan:

Yes , you nailed it ! I will check into dscr loan & yes I’ve been in the caregiver industry privately & institutions . Thank you sir I appreciate your time ! 

If you plan to occupy the property, you wouldn't be able to use a DSCR loan. Those are business purpose loans that don't permit owner occupancy. If you buy a property as a primary residence, you're acknowledging that there is an expectation for you to occupy the property for a minimum of one year. If another lender is advising you to act like it'll be your primary residence knowing you intend to immediately make it an investment (based on your statement that they said to do this after closing), they are advising you to commit fraud. Now if you live in the property for at least a year and THEN make it an investment, you're in the clear. Can't use a DSCR loan for that though.

Quote from @Bill Hughes:

Quote from @Brittany Minocchi:

I’m assuming you plan to pull cash out based on the market value since you got it below market…if you aren’t doing any rehab, you’ll need to wait 12 months for a conventional cash out or typically 6 months for a non traditional type of financing in order to use the appraised value.

 Yes, I am definitely planning to pull the cash out.  The bank didn't mention a holding time but I have heard that mentioned in forums here before. 
I do plan to put a roof on the building.  I wonder if that would qualify for rehab? 
My hope was actually that I could get a slightly lower rate than my HELOC rate, but I guess that was wishful thinking.
I wonder if going the commercial route with balloon payment is the best option.  Assuming I could refi before the balloon payment is due in a few years (and hopefully at a lower rate). 

To clarify my original comment - you can pull the cash out immediately with delayed financing (which I’m guessing is what your bank is offering you) but you will be limited to your initial investment. So, if you bought it for $400k but it’s worth $600k, the $400k is what will be used to determine the cash out amount. In order to use the $600k figure (made up just as an example, whatever your appraised value would be) you’d need to wait 12 months from the time of purchase. If you go with a non-conventional type of financing, this is where lenders will allow shorter seasoning periods but usually want to see that rehab was completed. I can’t speak for everyone but I don’t believe the lenders that I work with would allow this with only a roof replacement. They want to see that the work done will justify that new value. Even without rehab though, you can still get away with 6 months most of the time going this route, maybe less. From my experience the lenders that allow shorter seasoning tend to have higher rates and fees. 

What's the benefit of seller financing here? Why not get a 30 year fixed loan meant for rentals instead of boxing yourself into a balloon in 2-3 years? That still doesn't solve your down payment issue though…could you form an LLC with a silent partner that would contribute the down payment? The perk of using other peoples money is not typing up your own….but if you don't have reserves (meaning funds in the bank or other liquid assets) as a backup plan as others have mentioned, 100% financing is risky.

Hey @Aarielle Pannesi - you could go either way. If you can qualify with income and employments docs and DTI isn't too high, a regular conventional loan could be okay. Can't close in an LLC f that's a concern.

You can close in an LLC with DSCRs and don't need income or employment docs, DTI is irrelevant. There's usually a prepayment penalty that will kick in if you refinance, but most lenders give you the option to buy the penalty down or out completely. Some states/lenders have restrictions when it comes to PPPs as well.

As far as rates, they're pretty comparable these days. On a SFH, expect at least 15% down with conventional and 20-25% with DSCR. You want the ratio to be 1.00 or higher. There are lenders that will go below that, but rate and terms aren't favorable. Both have 30 year fixed terms available.

Let me know if you have any other questions, happy to connect!