All Forum Posts by: Jason Wray

Collyn,

Easy fix you have few options first there is DSCR which requires No employment and does not look at or use any personal or business income. If the investment property you are buying can debt service itself each month from a "Common Rent" standpoint its approved. The home can even be vacant because it uses the appraisal 1007/rent schedule to verify local rents. The rents have to be equal to or greater than the PITI payment for a good rate.

There is a DSCR options that goes under 1.00 so if the DSCR is .85% for example it can still be approved but rate will be higher.

You also have either a Bank Statement or 1 Year 1099 program that allows you to use either 12 or 24 months bank statements to use an average of gross deposits to qualify. If you have few employees or none they can use 75% of your gross deposits Divided by 12/24 for the monthly income. The 1 year 1099 program is as it sounds the UW will use the most recent 1099 to do a 12 month average.

If you had a year that was slow or you wrote everything off DSCR is not a bad choice and depending on a few factors rates are not bad. It also offers options like 30/40 year amortization and I/O Interest only of needed. The good thing about I/O interest only is the underwriter will use the (ITI) to qualify not the PITI. So they use the Interest, Taxes & Insurance payment to qualify the DSCR ratio. This can also help cash flow higher until you refinance down the road for cash out or lower fixed rate.

You can use the 1031 exchange so long as it is put back into another primary or investment home.  The funds have to all be used anything left over is considered the "boot" and can be taxed.  One thing you can do is put the money back into one or more properties and at a later date simply do a cash out refinance.  Cash out refinance is tax free money.

You will be required to wait 12 months on a primary home and 6 months on an investment if you go DSCR.

Justin,

I am here in St. Petersburg and knowing the markets in Sarasota I would say do not sell the house. What they can do instead is a quick and easy cash out refinance since rates are dropping back down. They can take out enough for a down payment for the next house and a little extra to put into savings as a "What if" fund maybe 3-6 months PITI based on the new home payment. A what if fund is just a little insurance fund you keep because "What if" your car breaks down, Get sick, major accident, renovation funds Ect…

The money is tax free and since they owe so little if they take out cash and go back into a 30 year fixed it will more than likely be close to the same payment they have now. Now most parents might cringe at hearing starting a mortgage back over to a 30 year. Reason why it could be a great idea is that they will have cash in hand with a lower payment.

There is no prepayment penalty so they can pay as much as they want as fast as they want but the goal is to be comfortable while the Florida property cash flows.

Rose,

Mortgage rates have dropped since December if you have owned the property for 6 months simply do a "Rate & Term" refinance and transition into a conventional loan. Remove the MIP if possible and lower rate and it opens you options up to a long term rental.

When you refinance you list the property going from primary to intended use as investment.

You do not need 12 months title seasoning to do a rate and term or to transition to Conventional if there is a "Tangible Benefit".  

There are times when it makes sense and when it does not make sense. If you can lower the rate by 1.50 to 2.00 points and reduce MIP to PMI it may make sense.

Depending on your LTV 7% is not that bad for an investment property. If your LTV is under 70% rates are in the 6's with good to excellent credit. The other thing to keep in mind is you can do a rate buy down using the equity to cover the buy down fee. You also want to make sure you are not paying multiple points for that 7% rate.

DSCR is great if you want to avoid using your income/tax returns due to DTI or large write offs. Most 1099 self- employed investors generally write everything off so using 1040's, 1120's or 1065's is a no go for tax returns. If you can qualify using your income I would avoid DSCR but again its not the end all they have value.

DSCR single family requires 15% down, 2-4 Units require 20% down, they offer 5/6 ARMS, 30 & 40 Year fixed and I/O Interest only options which can help cash flow first few years. Downfall is they will require a prepayment penalty in order to get a better rate. If you are buying a turn key and do not expect to take cash out for a few years just gauge that on your prepayment penalty years.

Rates vary depending on credit scores, LTV, DSCR ratio, Loan amount, Property type, number of units.

Good news is rates have been dropping so DSCR may not be a bad option if you buy and simply refinance in 12-24 months. Just have to make sure you request a 1-2 year prepay.

@Rebecca Ramos - Just wanted to add a buyer does not have to be scared to buy a home and want to move in 12 months. There are some ways to ensure you never get questioned and its fairly simple. When a buyer knows they want to buy and buy again fairly soon they need to target the homes in order.

Bank loopholes which cannot be questioned; Buying smaller home first, then buying bigger home (Sqft/GLA) we review it as growing family, need space for office, dogs etc.. Buying a 2-4 unit first and then wanting to buy and move into a detached SFR makes sense tired of neighbors, want more privacy etc. Buying a modular or mobile home first and then next move into a single family.

Buying a home out of state only having to put 10% down can be used as a short term rental immediately then on the second year you refinance and transition into a investment you only need 85% LTV.

The tough part is when a buyer purchases a single family home and then wants to buy a 2-4 unit and say they want to live in a unit. If the 2-4 unit is inferior and the home they are leaving is superior bigger in sqft/gla it usually gets flagged. It can be done but you need to pay close attention to current home and new home.

A Loan officer cannot alter their loan officer compensation it would violate the LO Comp rule under the "Dodd Frank" regulation.  The only way you could pay less is if the lender/loan officer agreed to have another loan officer in the office to close one or more of the deals who was on a lower compensation plan.  

Every loan officer is paid based on a percentage I have seen it range from .75 up to 3.50% which means that margin is added to your rate.  You typically see lower rates and fee's when you use a Bank versus a Lender or Broker.

Even though its a very "Grey" area I have seen some managers agree to cover the appraisal or drop a hard cost fee.  If that branch or lender gets audited they are going to pay a fine though so thats why most do not reduce fee's.  It's so there is a fair and even playing ground and what person is not paying more versus the "other guy".

Jemma,

Pretty much all DSCR loans will require (3) separate purchases because each loan is assigned to the property and its individual parcel. If they were all on the same parcel you could do just one loan but sounds like that's not the case. Which means they are going to hit you for 20% down and closing costs on all 3 loans.

Rates have dropped a bit over the last week on DSCR but they are still dependent on e few things like loan size, (Lower the loan amount higher the rate), Credit scores (under 740 higher rate),property type, number of units and DSCR ratio (under 1.10% rates are higher) DSCR over 1.35% gets a lower rate (Depending on lender).

Most DSCR loans carry 1.50% - 2.75 points with an average range of $1500-$2100 in hard costs (processing, underwriting, credit report ect...)

Peter,

First Congratulations! Secondly, lets connect I am here in Florida as well and would love to talk networking. Send me a message or an email.