All Forum Posts by: Patrick Roberts

Is this for commercial multifamily or residential? 

Probably going to be difficult to pull this off for a residential property. Will the private lender have their own mortgage on the property, or will this be an unsecured loan? If the PML will have a mortgage also, then I dont know of any lenders who are going to allow higher than 90% CLTV. The majority of DSCR lenders do not allow any subordinate debt outside of a seller carryback.

If this is an unsecured loan, then it will vary by lender on whether they allow this, although I have no idea why someone would lend unsecured on a real estate venture. 

Your best bet for a refi is DSCR. Conventional wont fly with an entity being the borrower or the beneficiary of the trust. Also, you'll want to dig into the LTV before getting too far along the path as most DSCRs are going to cap at 80% LTV. The trust may be a problem for a lot of lenders, but an LLC/entity will not.

I see that you dont want to refinance the property. If there is a lot of equity in it, you may be able to find someone willing to lend in second position on it. This will be complicated by the fact that this is a consumer purpose loan, but it might still be worth looking into. 

Another option would be a personal lender like Prosper. They offer unsecured term loans in the high single digits and low teens for debt consolidation and other purposes and typically offer 2-5 year terms. You can also check into similar personal loans at local banks and credit unions. These loans are exactly cheap, but are probably still better options than the 20%+ on most credit cards. 

 The FHFA signed a directive today that very possibly may have killed HomeReady/HomePossible. Lenders will be getting updates on this from the GSE's over the next few days. I recommend checking in with your lender to confirm these programs are still available if you plan to use one of them. 

Im in Charleston but our branch is in Columbia in 5 points. Happy to chat or help. We currently have an intern from USC at the branch, which should wrap up at the end of the semester. The budget for the internship is part of a grant that may renew next semester. If it does, Im happy to chat about bringing you on so you can see REI finance from the inside - Conventional loans, DSCR, etc.

You're unlikely to make this work with a 203k loan, which is an FHA product. FHA is only for primary residences, and FHA is very strict on who can provide gifts or be coborrowers. Borrowing the downpayment from others will not fly on any FHA loan unless its coming from some kind of DPA program in the vast majority of cases. Also, using an FHA loan with plans to refi shortly afterward isnt a great plan in general as you will pay 1.75% in UFMIP that will be lost when you refi.

Freddie Mac has a conforming renovation loan product for investment properties, but borrowing the downpayment is unlikely to work. If the downpayment is coming from OPM, they will likely need to be coborrowers on the loan with you. 

If you're able to use hard money for the acquisition and construction costs, this will be much simpler. I would expect a downpayment of 20-25% of the purchase price and probably needing to contribute 10%+ to the rehab budget. Once the project is complete, you can refi with DSCR or conventional for the permanent/take-out loan.

More than likely, the bank that is underwriting the credit line is basing the calcs on a draw period followed by a relatively short amortization/repayment period, such as 15 or 20 years. For instance, $750k @ 8% on 20yrs is $6,273/month, which is almost 49% DTI by itself. Add in $2,000/month on the land payment and you're well over 50% on the backend.

One option would be to settle for a lower limit on the line that would make the DTI work as is. Another option is to look at a cashout refi 30 yr FRM rather than a credit line. This would probably shave around $2k/month out of the payment.

I would ask for details on how they are calculating DTI and what they are including/not including. It may be as simple as waiting until the next year's tax returns are out to include more income (most banks base on Helocs on income reported on tax returns, and most have different guidelines for how it's calculated).

I recommend you have an experienced lender look at this deal prior to purchasing, even if you plan to buy with cash/heloc. Tiny homes are often lumped in with non-traditional housing and may be difficult to refinance after the fact. This is especially true if the property is rural. If there arent comps for that kind of property, you may struggle to refi it when youre ready and may be trapped between keeping the heloc drawn or selling the property. 

In most circumstances with good credit, HomeReady or HomePossible is going to crush FHA from a value standpoint. Generally, the biggest deciding factor between FHA and Conventional is credit. If your FICO is over 700 and especially over 720, Conventional is usually a better option.

Im not aware of any that allow this, but it doesnt mean that they arent out there. Most of the DSCR programs I'm aware of specifically prohibit subordinate financing.