All Forum Posts by: Connor Hibbs

 I'd agree that the rate does seem a bit high here for a 75% purchase loan. It could make sense if the borrower's got a lower FICO here, but otherwise someone threw some yield spread in there probably. 

Also take a look at a 3/2/1 stepdown for your PPP. That will likely be around this rate anyways but give you more flexibility if you want to refi in a few years.

Hi Deborah, I'd be happy to answer some of your questions on DSCR loans as I've been originating them for a while.

1. The approval process is much less intensive than it would be for a conventional loan as the DSCR loan is low doc and will primarily be based off the cash flow of the property and your FICO Score. Most Lenders will want to see that the property does cash flow well (typically over a 1 and 1.2+ for 5+unit properties), is the property itself a match for that lender's guidelines (rural? min property requirements, state they lend),does the borrower have enough liquidity to close on the loan (liquid assets, not DTI and no need for tax returns).

2. Most common you will see the following for MAX LTV; 80% on purchase, 80% on rate/term refis, 75% on cash-out refis. Some lenders can go up to 85% on purchases and 80% on cash-outs but most tend to stay with the initial LTV's. The rates are constantly changing with the market. the lowest I've seen was a 3.49% in the last 2021 to early 2022 (right before everything launched up in rate), but as of 10/1/2024 the lows that I'm seeing are at 5% for an SFR with rate buydown/ reduced LTV etc.

3. Lenders may have subsets of rules or guidelines for areas that have very high default rates such as increased min property values or experience being required, but other than LTV's going down for a while by 5% in late 2022 I haven't seen anything crazy. I'd say over the last 9 months that lenders have gotten a bit looser with DSCR requirements (scaled with the borrower's FICO).One challenge though may be vacancy on refi's. Some lenders will cut your LTV if you want to refi, but do not have tenants in place yet. Regarding reserves keep in mind that your taxes and insurance get escrowed so if they are due in 2 months then your reserves at close will be much higher than if you'd just paid them.

4. I've been more on the origination side here so I can't speak too much personally as I try to get some investments under my belt, but from working with investors over the years it is a key part for them to pull additional liquidity for new projects they pursue as well as a great tool to keep their properties profitable over a long-term period. I'd highly recommend looking more into the BRRRR section on BP to learn a bit more about how they use DSCR loans to scale.

Welcome to Bigger Pockets, you'll find a wealth of knowledge here!

I would be happy to help here. My company specializes in 1-4 unit investment properties (DSCR and Purchase and Rehab Loans), but I should be able to help or connect you with someone better for other types of loan scenarios.

Hi Diane,

If you're looking at properties with purchase price values under that 75k mark then your best bet is to start with a light rehab loan scenario. With rehabs you can get to significantly lower purchase prices and typically the lender will just be looking for a100k+ ARV so that you can refinance out of the loan once rehab is completed (100k as-is value is pretty standard for DSCR loans).

With rehabs experience is the biggest factor to LTV and rate so partnering up with someone for the first one or first 3 will get you significantly better terms (working in the same area can also provide benefits in terms of LTV). Then once your projects are completed then you can either sell or refinance and hold the property based on what works best for your strategy.

Put them on as a minority member of your business entity/ LLC and you'll have no problem using their funds with just about any lenders. Some Lenders do take issue with "gift funds" or other liquidity provided by partners who are not on the Operating Agreement. Also, be sure to clearly outline the agreement you have with your investor in a signed document so that there is no confusion on the back end.

 I'd push on a clear explanation of the fees then and where their communication broke down. That may help you feel more comfortable here or if it doesn't then I'd explore other quotes. I've seen several other lenders reply in this chain, including myself, who could all provide you with rough term scenarios, but first I'd talk with your current broker and lender to see where the real issues stemmed from.

Hi Andrew,

1. For investment properties most lenders will just be looking at your Fico, liquidity, and experience. For starting out you'll need to make sure that you've got enough liquidity (be sure not to stretch yourself too thin too). Something that could be a great help to you is to go to a local REIA and find someone willing to mentor you in the early days. If you're looking to rehab properties, then LTV and rates are directly related to completed projects and having someone as a minority owner for your first one will help you tremendously on top of the advice that they can share with you along the way.

2. Bigger Pockets has a tool that you can use for this, although be sure to look at the numbers AND the area of the property as well. The numbers could look good on paper, but if you can't offload/rent the property on the backend then you may struggle.

3. Don't in your first few. Keep in mind that even if you do everything perfectly there are variables that may come up. The last thing you want is to stretch yourself as thin as possible on the first one just to have an unforeseen expense come up. When you have a few good cash flowing properties under your belt then you can push it a bit more but be patient with your first few and look for the deals that work best for you.

Rochester is a good area to be starting since there are a lot of properties that are relatively inexpensive that have room for improvement so there will be plenty of opportunities for you, but I'd highly recommend you go to your local REIA (Real Estate Investors Association) and speak with them before jumping into anything. They will be proven successful investors from your area who meet up once a month to go over what works for them, what's aching them, and they're typically very willing to help new investors.

 That's likely the broker trying to get more money at the end. Push back on that because the lender would have included those from the start and 4,000 would be the highest processing Fee I've seen.

I'd be happy to help you here Yusuke, I'll send you a DM. Based off FICO 80% should be no issue as long as the condo is warrantable (non warrantable may still be ok depending on why it is non warrantable). Your rate will also be a bit dependent on your FICO but you should be in the 6's