All Forum Posts by: Stephanie P.

Yes, that is correct.

The term "limited cash out" is another term for rate and term refinance. Given what was described, you'll be limited to 75% LTV if it's being sold to Fannie and Freddie. If he's saying he can go to 80%, his company is keeping it in house for servicing unless he doesn't know what he's talking about.

When you say "commercial construction loan" do you mean a hard money loan? Sometimes terminologies can get mixed up in this arena, especially when dealing with LLC's etc...

Is the property commercial? Why is there a commercial loan on a property that is eligible for conventional financing?  Just a couple of questions I would ask if originating the loan.  To answer your question, 75% is the max on an investment property limited cash out refinance (same as rate and term).  I've attached a link to the Fannie Mae eligibility matrix.  If you have a local bank that will do 80%,they are going to keep it in house and service it.  If the numbers work, take the 80%.

https://singlefamily.fanniemae...

It's not just about turkey and stuffing.  George Washington said it best...

There are a lot of variables that come into play for LTV's. Rocket is a great company to use for a cookie cutter loan but I don't think they are a good reference in your situation. Smartasset.com looks like some sort of a clearinghouse for banks and Quicken to sell their wares however, they are right if they told you the LTV for FHA will change if you go below a certain credit score, but the main variable credit score brings into the situation is rate. The higher your score, the better your rate and I doubt they mention the self sustainability requirement for FHA when it comes to 3 and 4 units until you get pretty far into the transaction.

You need a decent broker that can help you navigate the mortgage waters; not a bank or a clearinghouse because they don't have the breadth of products you need.

Hey Robert

You've got a lot going on.

Here are the issues I see you may encounter.

If you encumber yourself with additional debt meaning the two DSCR loans, you will negatively affect your debt ratio for the permanent part of the construction to perm loan you are in the middle of. Even if the DSCR loans are in an LLC, if you're a personal guarantor (and you will probably be a personal guarantor) the loans will be counted against your debt ratio. The loans may not show up on your credit, but they will show up on the DRIVE report and you will have to add them in. Also, if you do not have long term leases in place, you may not get the mortgage offset by 75% of the rents. Most conventional lenders do you really recognize short term rentals and their potential upside, so keep that in mind.

Rural is a problem for MOST DSCR lenders; some even shy away from tertiary markets so beware. I would not look for a loan from a local bank in your circumstance because honestly, they wouldn't know what to do with it. You need a good broker that deals in DSCR loans and specifically DSCR loans for vacation rentals. Rates will not be close to conventional loans.

Hope my doom and gloom helps.:)

Stephanie

Hey @Shawn Blake

Best of luck in your production business.  I think you'll find the tax structure of being self employed (along with the obvious freedom, stress, exhilaration and all the other adjectives that come with a massive change in life) favorable to your former W2 life.  Regarding your questions:

1. What is the best strategy for getting a loan as a business or self-employed person? DSCR loans don't require tax returns or income verification. Just 20% down for a purchase, decent credit and a property that doesn't need renovation. Current rates are in the 4's on a 30 year fixed, so not heinous and since you don't qualify for conventional financing, this is your next best bet. Reno loans are available without income verification as well.

2. Am i able to take advantage of first time home buyer programs this way?  No.  You'd have to verify your income and have it for 2 years.  Changing your job eliminated that unfortunately.

3. What are you seeing in the market as far as getting a loan this way? DSCR lenders are busier than they've ever been because the rates and programs still allow for great cash flow, the loans close with minimal effort and there is more uniformity in this sector of the mortgage business.

4. Atlanta or Houston?  Either one is a good choice although my personal choice would be anywhere in Texas; not limited to just Houston.  Tyler is a great market.

If you're in a position to leverage your rental property to get the other property and you're in a better cash flow position with both, I say yes. It's all a math problem. Either the numbers work or they don't. If you can house hack using an FHA loan for units or conventional for owner occupied money, you should consider that as well. If you have a primary residence, try a HELOC on that for the down payment and closing costs rather than depleting your savings.

For single family, go conventional because of the mortgage insurance. If you're looking at units, go with FHA because the ltv is considerably higher than conventional. Even with the mortgage insurance, some FHA loans are pricing out cheaper than conventional these days.

Yes, credit score is going to help with your rate.

Is the property stabilized (no construction and has tenants) and when did you buy it?