All Forum Posts by: Stacy Raskin

Another option is to pair with a fixed rate 2nd mortgage. The fixed rate 2nd rates are going down while HELOCs are going up since HELOCs are tied to the Fed Funds rate which is increasing.

As a mortgage broker, I work with different wholesale lenders who offer different options depending on what a client is looking for. Happy to connect. 

There are conventional loan programs with down payments from 3% and up. 5% down gives some more additional loan program options.

@Eran Hahn, I could help you with a DSCR loan in that area. Not sure how much you know about DSCR loans but they don't rely on your income. DSCR loans typically require a 20-25% down payment with 25% down payment getting a better rate.

Your credit score will be a deciding factor for the rate and fees you pay. The higher your credit score the better. Typically lenders divide up credit scores in multiple buckets with 760+ getting the best rate for some lenders while others it's 720, 740 or 760 gets the best rate pricing. Most lenders break scores in 20 point buckets so a 720 score would get a better rate than 700-719. Most lenders will use the middle of your three credit scores and if there's more than one applicant, the lender will go with the lower of the two credit scores. Most lenders use FICO credit mortgage credit scores.

Here's a bit more in detail about how rates are calculated for DSCR loans:

1. Credit score- the higher the best. 760+ generally gets best pricing for investment property loans with most lenders

2. Loan to value ratio: The higher the loan to value ratio (LTV) is, pricing takes a hit. So your pricing will be higher for a 80% LTV loan than for a 60% LTV loan.

3. Are you cash flowing the property? Is your DSCR ratio greater than 1-meaning are you cash flowing. Many lenders will not do a DSCR loan unless cash flowing. If they will do a loan with less than 1, the pricing takes a hit. I've included an example below to help illustrate this.

So different lenders have different rates (which do vary even for DSCR loans) but these are factors they all consider.

See DSCR ratio example below:

DSCR < 1

Principal + Interest = $1,700

Taxes = $350

Insurance = $100

Association Dues = $50

Total PITIA = $2200

Rent = $2000

DSCR = Rent/PITIA = 2000/2200 = 0.91

Since the DSCR is 0.91, we know the expenses are greater than the income of the property.

DSCR >1

Principal + Interest = $1,500

Taxes = $250

Insurance = $100

Association Dues = $25

Total PITIA = $1875

Rent = $2300

DSCR = Rent/PITIA = 2300/1875 = 1.23

Lender terms and fees vary widely. As a mortgage broker, I shop my clients' loan to get them the best possible loan and the least fees while helping them to reach their investment goals. I'll send you a message as well.

@Sergio Raul Coronado, I'm down the road from you in Westlake Village and I'm an individual mortgage broker...not a mega bank or an online portal which is good for getting better rates and loan experience. I'm also have my CA real estate brokers license so I can potentially help with real estate advice. Also, I noticed you're in Woodland Hills....I went to Taft High School! I'll message you as well. 

@Shaun Lloyd, I recently helped a client pay back a HELOC on one property with a fixed rate 2nd mortgage on another property. You have equity so I think the fixed rate 2nd could be a good option or potentially a full refinance depending on your goals since a fixed rate 2nd will be a higher rate then a fixed rate first mortgage. You have equity so you have options. I'll send you a message as well.

@Joseph Turner, if you're looking to buy in CA areas with high levels of appreciation, I've had clients take out a HELOC or 2nd mortgage and pay back the HELOC or 2nd with a cash out refinance once values appreciate.

@Christian Jones, if your cash flowing and they're rental properties and you want equity out, a DSCR loan can be a good way to go.

What is the rough property value on each one? Many DSCR lenders have minimum property values.

Not sure how familiar you're with DSCR loans- they don't consider your income.

Here's a bit more in detail about how rates are calculated for DSCR loans:

1. Credit score- the higher the best. 760+ generally gets best pricing for investment property loans with most lenders

2. Loan to value ratio: The higher the loan to value ratio (LTV) is, pricing takes a hit. So your pricing will be higher for a 80% LTV loan than for a 60% LTV loan.

3. Are you cash flowing the property? Is your DSCR ratio greater than 1-meaning are you cash flowing. Many lenders will not do a DSCR loan unless cash flowing. If they will do a loan with less than 1, the pricing takes a hit. I've included an example below to help illustrate this.

So different lenders have different rates (which do vary even for DSCR loans) but these are factors they all consider.

See example below:

DSCR < 1

Principal + Interest = $1,700

Taxes = $350

Insurance = $100

Association Dues = $50

Total PITIA = $2200

Rent = $2000

DSCR = Rent/PITIA = 2000/2200 = 0.91

Since the DSCR is 0.91, we know the expenses are greater than the income of the property.

DSCR >1

Principal + Interest = $1,500

Taxes = $250

Insurance = $100

Association Dues = $25

Total PITIA = $1875

Rent = $2300

DSCR = Rent/PITIA = 2300/1875 = 1.23

Lender terms and fees vary widely. 

@Garrett Ayers, FHA loans have mortgage insurance that will never drop off the loan unless you refinance. Conventional loans you can get mortgage insurance off either by paying down the loan by 20% or if the home increases in equity, you an refinance the loan to get rid of the PMI.

Whether to go conventional or FHA really depends on your individual scenario regarding your credit and down payment. For example, FHA is more useful for people with lower credit scores. I'll send you a message as well.

@Art Valverde, there are some lenders now doing DSCR loans at 20% down but you will get better pricing at 25% down. Your credit score will be a deciding factor for the rate and fees you pay. The higher your credit score the better. Typically lenders divide up credit scores in multiple buckets with 760+ getting the best rate for some lenders while others it's 720, 740 or 760 gets the best rate pricing. Most lenders break scores in 20 point buckets so a 720 score would get a better rate than 700-719. Most lenders will use the middle of your three credit scores and if there's more than one applicant, the lender will go with the lower of the two credit scores. Most lenders use FICO credit mortgage credit scores.

Here's a bit more in detail about how rates are calculated for DSCR loans:

1. Credit score- the higher the best. 760+ generally gets best pricing for investment property loans with most lenders

2. Loan to value ratio: The higher the loan to value ratio (LTV) is, pricing takes a hit. So your pricing will be higher for a 80% LTV loan than for a 60% LTV loan.

3. Are you cash flowing the property? Is your DSCR ratio greater than 1-meaning are you cash flowing. Many lenders will not do a DSCR loan unless cash flowing. If they will do a loan with less than 1, the pricing takes a hit. I've included an example below to help illustrate this.

So different lenders have different rates (which do vary even for DSCR loans) but these are factors they all consider.

See example below:

DSCR < 1

Principal + Interest = $1,700

Taxes = $350

Insurance = $100

Association Dues = $50

Total PITIA = $2200

Rent = $2000

DSCR = Rent/PITIA = 2000/2200 = 0.91

Since the DSCR is 0.91, we know the expenses are greater than the income of the property.

DSCR >1

Principal + Interest = $1,500

Taxes = $250

Insurance = $100

Association Dues = $25

Total PITIA = $1875

Rent = $2300

DSCR = Rent/PITIA = 2300/1875 = 1.23

Lender terms and fees vary widely. As a mortgage broker, I shop my clients' loan to get them the best possible loan and the least fees while helping them to reach their investment goals. I'll send you a message as well.

@Mitchell Catoe, DSCR loans are great rental property loans as they only focus on your credit score, down payment and DSCR ratio- more on that below.

Right now DSCR loans require 20-25% down by most lenders and your credit score will be a deciding factor for the rate and fees you pay. The higher your credit score the better. Typically lenders divide up credit scores in multiple buckets with 780+ getting the best rate for some lenders while others it's 720, 740 or 760 gets the best rate pricing. Most lenders break scores in 20 point buckets so a 720 score would get a better rate than 700-719. Most lenders will use the middle of your three credit scores and if there's more than one applicant, the lender will go with the lower of the two credit scores. Most lenders use FICO credit mortgage credit scores.

Here's a post where I go into detail about DSCR loans as far as the importance of cash flow, credit scores and down payments:

https://www.biggerpockets.com/forums/49/topics/1080147-refinance-rate-105

Lender terms and fees vary widely. As a mortgage broker, I shop my clients' loan to get them the best possible loan and the least fees while helping them to reach their investment goals. I'll send you a message as well.