All Forum Posts by: Brittany Minocchi

In terms of securing long-term debt: depending on where your DTI currently falls and how the HELOC balance affects it, that could prohibit you from obtaining traditional financing. However, there are other non-traditional loans where DTI isn't a factor. 

Tons of people do exactly what you said - they don't want to cash out when their rate is low, or they want the ability to submit a cash offer, so they use a HELOC. Just make sure you've got a plan in place to pay it down/off and don't overleverage yourself.

Hey Robin! I’m in NE Ohio, happy to chat and find out more about what your goals are. 

If cash flow is your goal with a budget around $75k, Canton has been great. I've got multiple properties there and have never had an issue renting them out, especially if you're considering accepting Section 8 vouchers. There's a waiting list right now that's around 2 years long from what I've been told.

Hey Gustavo! 

Rates on a DSCR loan can vary by lender depending on things like FICO, property type, number of units, experience level, loan amount, term, coverage ratio…multiple variables. Prepayment penalties are another thing you'll want to factor in, especially if refinancing sooner than later is part of your plan. Happy to discuss further if you'd like to connect.

Not sure if this is factoring into your numbers (I didn't see it mentioned but may have missed it)….if you've owned the properties for less than a year (or overall have less than a year of property management experience) you're limited to using the income not exceeding the PITI of your new property. So, any income you get that exceeds the new $3500 mortgage is a wash. It doesn't get added onto your gross income.

There are loan programs for owner occupied properties that don't require income or employment documentation, similarly to a DSCR loan which cannot be used on a primary residence, but they require a higher credit score than conventional/FHA. You wouldn't have a problem with that part judging by your posted scores. It also requires a pretty large down payment of 20-35% depending on credit.

Hey Daniel! 

Feel free to reach out to discuss, but for now, here are some things to consider in regards to DSCR loans:

-Typically requires 20%+ down 

-May have a prepayment penalty (important to note if you plan to refinance after a short period of time) 

-Income/employment documentation not required 

-Lenders usually want the ratio to fall somewhere between 0.75-1.5, but other qualifications may affect this (credit score, loan amount, etc)  

-Minimum FICO 640-660 usually needed depending on specific program/lender

-minimum loan amount $75k-$100k depending on lender (likely much less of a factor in TX like it is here in OH) 

Hopefully that helps! 

Lower loan amounts can be tough because 1) loan officers don’t make much on them, so they don’t like to do them and 2) we run into issues with them passing compliance once loan costs are accounted for (compliance = the things we have in place these days to protect buyers and the economy from a 2008 repeat). That’s assuming you’re talking about traditional financing, nonQM is a different story….I have yet to find someone willing to go below $75k for those. I come across low loan amounts often in my market - happy to chat if you’d like to connect. 

Hey Thomas! 

Talk to as many lenders and real estate agents as it takes to find one that you "click" with. Rate is important, but so is being able to get ahold of your lender/agent. Highest performing does not equate to highest level of service in my experience. If they're slow to communicate at the beginning BEFORE you're putting offers on houses, that's a red flag. 

As far as lending goes, I would make sure to have your pre-approval ready before looking at homes for a couple of reasons: many agents won't work with you until you have one (not all, but most), and you'll know exactly what homes to look at based on how much you're approved for. Happy to connect if you'd like to discuss. I don't have any agent connections out that way, but I would start by asking friends and family about their experiences and go from there. Best of luck! 

Not to say that DSCR loans are BAD by any means, they definitely have their place - but as others have mentioned, it's usually better to go conventional for as long as you have that option. Common reasons people choose DSCR are if they want to close in an LLC or they have maxed out their DTI and are no longer eligible for conventional financing. You'll need to make sure the property will debt service, meaning that the projected income from the property will at least cover the projected PITIA. Lenders have different requirements for this, with ratio requirements falling anywhere between 0.75-1.5. For example, a property with a PITIA of $3,000 may need to show an income of $2,250 - $4,500. The required ratio can also vary based on your credit, loan amount, etc. Again, this all varies by lender.

DSCR loans are different in that they don't require income/employment information like conventional loans since they qualify the property moreso than the borrower. However, credit is still an important factor. Another thing to consider is the higher cost to the loan. A DSCR loan isn't regulated the same way as a conventional loan, so be aware of higher fees and prepayment penalties. If your plan is to refinance sooner rather than later, a refi will likely trigger that penalty.

I hope that helps, good luck!