All Forum Posts by: Jay Hurst

 https://selling-guide.fanniemae.com/sel/b3-6-05/monthly-debt...

If you do not have the time or money to go see the house and the neighborhood in person, then do not buy it. 

 If this is a real quote, jump on it. Like Patrick I am a bit skeptical that it was quoted correctly as it way below market for a 10% down second home due to loan level pricing adjustments. 

https://singlefamily.fanniemae.com/media/9391/display

 North Texas based and we have multiple no seasoning options. 

 Oh yeah, get that everyday. People simply believe what they want to believe even when confronted with evidence to the contrary. 

I will add a few more:

1. For everyone loan products the details matter. There is no such thing as "the rate". DSCR loans are no different. For example, if your DSCR is below 1.0, meaning the PITI+ HOA is more then the rent the property will bring in, that is a more risky loan. Therefore, there is a pricing adjustment for that. Well, if an experienced well intentioned LO understands that the DSCR will likely be say .80 on this deal it will be priced that way. That rate will LOOK higher then the guy who prices the loan assuming a 1.15 DSCR. Of course, before closing you will get an email saying "oh by the way, the rate and fees has to go up because your DSCR is .80, not 1.15." well, of course, that was what is was always going to be and you likely passed up a better deal because of the details you chose to ignore. Make sure the LO that is quoting you is asking all the questions.

2. When the original rate quote is a 5 year pre-payment penalty without  obvious disclosure. The longer the pre-payment penalty the better the rate is, so a 5 yr PPP will on the surface look better then say a 1 yr PPP.  But, 5 years is a LONG time in a interest rate cycle. The longer the PPP the more likely you are too miss out on repricing your debt with a refinance. So, a 5 yr PPP might make sense for you, but make understand that true cost.  Ask for other options as well, and if they tried to hide the PPP amount and do not make it clear from the outset, go elsewhere. 

3. If the LO tells you that DSCR loans are the way to go in your situation because the income/loss does not get counted into your debt to income ratio when you apply for a full documentation loan on a primary residence. This is simply NOT true. There a number of ways the underwriter finds out about the properties, but the most obvious is your tax returns. The income/loss will be right there in black and white. If the LO honestly does not understand this very Lending 101 fact what else do they not understand about the business? and if they do understand it but tell it to you anyway, do you think they are doing their best to give you the best solution for your situation or just trying to make a sell?

Yes, as Patrick points out you can as long as it meets the second home requirements. BUT, I will point out that the loan level pricing adjustments are the same on a second home as they are for an investment home. That is a just a fancy way to say the second home rates are the same as investment homes on conventional loans. So, where technically you can put down 10% on a second home where it takes 15% down for a SFR investment property other then there is not much advantage.

The pitfall is that if your house does appreciation the APR of the loan is VERY high. Do you NEED the cash? if so, a cash out option will be much cheaper in the long run. If you need the money AND cannot qualify for a cash out HEI is an option but just know it is expensive.

There are plenty of reasons to do a DSCR loan in a LLC, but protecting your debt to income ratio is not one of them. The income/loss of the property/LLC (no matter what type of loan it is) will flow through to your personal tax returns. Any loan that tax returns are required like a primary residence loan will take into account the income/loss.

Make sure you understand "seasoning period" when you are trying to use the new value to pull cash out. You will be directed to a DSCR loan that has a short seasoning period but they will have higher rate/terms then other options. Make sure your lender has more then one option.