All Forum Posts by: Sasha Mohammed

i dont think acreage is your issue here, but every lender will have different guidelines, so it's possible. Could it be that your appraiser marked the property as "rural"? This often does create an issue for DSCR lenders, and often means they chop leverages. the 12% rate tho -- that seems excessive to me, even in this market.

Since you already have an appraisal, take a little time to maybe call around. see if you can find yourself a better deal with a lender that will transfer the appraisal. 

Not a sales pitch, just for comparison sake: i just priced this out with ONE of our lenders who does offer STR DSCR and a breeze with appraisal transfers - 30 year fixed at 70% LTV with 680 fico is giving mid-8's (with 1 point plus lender fees). It was not giving me 75% LTV and i suspect it's because i need 700 fico to go above 70 for cash-out.

Point is - you should have options on this one. I suggest you reach out to an investor-focused brokerage for a 2nd opinion. 

I believe this will have to go through probate if there was no will :( I suspect, however, the process of probate may at least prolong the reverse mortgage company from being able to press forward with foreclosing (i could be wrong here, check with an attorney). 

Once it's clear and title moves over, then @George Randall is correct, there should not be cash-out seasoning for an inherited on conventional financing. IF you are intending to go with DSCR financing, you'd have to check with individual DSCR lenders for their seasoning requirements/ guidelines on such, but I suspect it is probate which will open up refinance doors for you.

keep us posted on what you find, this is an interesting one.

if for sure you intend to sell in a year or two, i would look into bridge financing. it will be more expensive on rate more than likely, but you avoid the prepayment penalty, and the payments are uuuuusually interest-only. 

if you think you might change your mind and keep it for a while, DSCR is not a bad option, but i would look into Freddie Mac SBL. those rates are still in the 6's and 7's, albeit a bit tougher to qualify for... but even on sale, it could open you op to a seller-financing option if that behooves you.

or for easier qualification, there are lenders that will do a 30 year fixed DSCR and you can still buy-down the PPP to 1 year. then you have best of both worlds - short PPP but the option to keep if you change your mind on sale.

i think your issue is a title seasoning issue. you mention buying your wife's family home... could you elaborate on what that means? who is currently on title on it? who is the reverse mortgage currently under? what is the circumstance here? sorry to be frank but, did that individual pass and your wife inherited the property? We'll need more info here to determine. 

The reason im asking, because if you're trying to move a property from one person's name to your LLC, it will likely be seen as a sale transaction. not just for property tax reasons (this should be a consideration as well), but also in what type of loan the lender would need to facilitate for you, and in turn, if you'll need to bring in a down payment as well.

if you can somehow be added to title, (you'll need some seasoning while on title, this wont be immediate), then you could likely facilitate a cash-out DSCR transaction and only borrow what you need to pay off the existing lien. every lender's guidelienes on cash out seasoning and title seasoning will be different, so i suggest you make a game plan before you go messing with the title.

@Stephanie Medellin has this spot on! 

In this situation, looks like the buyer does not need to come in with any more cash than originally planned, it would just be allocated differently than originally planned and may make a small impact to the interest rate. 

The bank asking the buyer to put down the extra $15k would only be in efforts to maintain the 40% LTV. which, in this case, with the little info we have, doesn't seem necessary.

Hi Shane! 

i just priced a HELOAN out for myself (also in OC), it was giving me somewhere in the mid-9's. The rate here will vary depending on the lender you go with, equity, qualification method, etc. etc. so you'll have to DYO research on this. 

Right now, pricing out, say a 25% down on SFR investment properties DSCR are giving me somewhere in the high 7's to high 8's.

theoretically, borrowing the money directly on the property you intend to buy COULD be a lower rate of interest. but you'd have to shell up some cash to put down, so there's your trade-off. 

there's no one size fits all, but i suppose it might make sense to pay a little more in interest in order to forego the skin-in-the game.... but i would encourage you to also review the risk of collateralizing your primary residence for the purpose of buying an investment property. Personally, i don't think i'd be comfortable with that, but everyone's risk appetite is different. 

Hope this was some food for thought at least! GL!

i agree with @Devin Peterson, broker gets you in touch with a much wider net of lenders with one phone call. 

Banks are often not the best options, and in-fact, many of them right now are exiting the mortgage space altogether. Big depositories tend to be best priced on "jumbo" loans (check loan sizes in your specific county and property type for what is considered jumbo), as they are lending their own funds on these products. Many are shying away from investment properties altogether; some may entertain financing if you have a large deposit account (or are willing to establish one) with their institution. 

The main decision you'll want to make - how do i want to try to qualify for this loan? if you don't have the personal income (DTI; either with taxes and W2s, or some type of alternative bank statement program etc.), then you'll likely need to go with something like a DSCR loan.

hopefully that would at then determines which lenders you'd be approaching for this transaction. 

For consumer lending, the 2 years' consistent and stable income really only applies if you are self employed, or a part-timer. if you start a W2 job with either full time hours or a salary basis for pay, you should be able to use 100% of that base income for qualifying for a fannie/ freddie loan all day long. The catch to being able to use the 75% of the lease from the subject property is to document a "present housing expense" -- which doesn't necessarily need to be a mortgage. if you're paying rent, document that, and depending on the lender, you should be good to go (as long as your DTI is in line).

Most investors move away from this strategy, though, as its cumbersome to qualify; and to be frank, most investors wont qualify with the way their taxes are filed. 

For those, there is commercial lending. Looks at the property as a business (is it cash-flow positive after carrying costs) to qualify you, not YOU as a BORROWER. Yes, the rates are higher, and many lenders will want to see you own your primary first (not all, though).

...But as others have mentioned, getting your foot in the door with slightly lower returns is more beneficial than not getting your foot in the door.

usually HELOCs are adjustable. And they are very difficult to find right now on investment properties. 

Alternatively, you could do a HELOAN, which would be a fixed interest rate, but is closed-ended, meaning you can only draw against it once, and then the rest of the term (usually 30 years) is used to pay back the loan. 

if you find a HELOC on an inv. prop, please let us all know! i would love to be able to offer this to my clients!

Yes there are options. I would recommend you look into a Broker that specializes in such loan types. They have networks and relationships established already to guide you through it. Most rehab lenders will want to see experience rehabbing, but there are some that will be ok with first timers. Here's a quick overview of how these transactions would look:

step one - rehab lender: short term loan, 12 months usually, IO payments. Will give you acquisition monies plus rehab monies in the form of a draw. Effectively you take one step (flooring), pay your contractors, then reach out to the lender for a reimbursement for that line item (in this case, flooring). Then move on to the next line item.  

step two - finish the project, and either sell to pay off rehab loan, OR (since your strategy is BRRRR) -- put a tenant in there with a lease.

Step three - refinance into a long-term-hold, typically 30 year fixed. Most do DSCR lending here as its much easier for qualifying and seasoning requirements than A-paper. These are also usually cash-out, which pays off existing balance from the rehab lender, and often puts cash back in your pocket from your initial capital investment.

Repeat :)

I omitted different leverages and rates on this as others reading this post will have different experience levels, credit scores, etc. These loan types are often very subjective to those different parameters, so its best to get a quote based on your specifics.