All Forum Posts by: Stephanie P.

Here are the steps I would take.

Refinance into a conventional loan to replenish your VA eligibility.

Buy another property, the be all to end all properties using VA.

Then buy an investment property using the cash out from the first refinance to buy a property using a DSCR loan where debt ratio doesn't come into play. You can get up to 80% loan to value, higher than Fannie/Freddie, on a multi family property and rates are in the mid to high 4's on a 30 year fixed. That's historically low not only for that product, but in general.

If you currently live in a single family property and try to buy a mutli family property, most underwriters wouldn't believe that you're actually going to live in the property because like you said in your post, the current house is not big enough for a growing family.  Going that direction doesn't make sense.

Stephanie

Just use DSCR funding. Rates on 30 year fixed are in the 4's with a couple of points. That way, you leave it in the LLC.

Stephanie

Hey Justin

Because it's an owner occupied transaction, you're going to be subject to TRID rules and guidelines.  What that means is you're not going to find anything that's very fast and you will not make yourself look like a cash buyer, regardless of what anyone tells you.

Stephanie

Maybe, if it's going to be a second home.

If it's rented for a year and you're not going to use it, it's a rental and you need to go that route.  If it's going to be used as a 2nd home, then do that.  Skirting the guidelines to get a little better ltv or rate isn't a sound business practice.

Stephanie

Hey Maddie

Welcome to BP

What you're considering would be mortgage fraud and it's a felony.  Yes, people do go to jail for it.  The way you are constructing it though, I don't think the loan would get out of the gates so you're probably good.

Best of luck though.

Stephanie

@Vince Rodriguez

Agreed, the OP should try to get the lowest rate possible, but that's not always Fannie/Freddie right now and it depends on their situation.

I am always on the side of exhausting conventional loans first, but to say whatever is over 3.875% is a scam is not accurate.

Couple of things.

Sometimes the lowest rate is commercial in today's market.

Your statement about prepayment penalties is contradictory.  Why care about a prepayment penalty if the goal is to keep the property long term?  A prepayment penalty is only triggered when the loan is prepaid and if they're keeping the property in this historically low interest rate environment, the prepay only ensures the lender they're going to get a decent return on their investment in the event of refinance or sale.

Some folks don't qualify to get a loan backed by Fannie/Freddie. Commercial or DSCR is a very viable, and I will add affordable, cash flowing option.

Stephanie

Not to be rude, but there are so many factors that come into play regarding lending like the borrower's qualifications, the property's qualifications, ltv and market conditions to just name a few, that saying someone is "getting scammed" when they're quoted a rate more than your perception of today's market is nonsense.

For example. This morning's rate range for a 3 unit in Summit County Colorado (Breckenridge, Dillon etc...) goes from 2 points at 4.125 to 3 points at 3.375. Both on a 30 year fixed. You can go down into the 2's if you pay a boatload of points. All of these are at 70% ltv because of Fannie's restriction on units. Not California, but similar MSA. If you wanted to go to 75% cash out on the same 3 unit, you could go use a DSCR loan an pay the broker 2 points at 4.5% and call it a day. You could even buy it down to 3.99 with 2 discount points if you want. Scam? No. Real time rates and real time offers. Again, all on 30 year fixed.

Everybody's situation is different and each loan is different.

One girl's opinion

Stephanie

@Julie Smith; @Polo Vazquez

Welcome to the world of DSCR lending.

There's an entire tier of lending that is easier to close, close in rate, higher in fees, but significantly lighter in terms of paperwork required for qualification and it's DSCR or debt service coverage ratio lending.

• No income verification required
• You can close in an LLC that you've had or just created
• Some lenders allow cross collateralization of properties
• Rates go as low as 3.99% on a 30 year fixed
• You qualify on your middle credit score and whether the property performs at a ratio above 1.0 (sometimes lower)
• Max LTV's are 80% on purchases and 75% for cash out
• Seasoning for decent rates and terms is 6 months from the purchase date
• No restrictions on the number of properties financed

Here's a real comparison to a Fannie/Freddie loan (after the lender letter from April that restricted lenders to originate only 7% of their portfolio in investment properties), 150K cash out investor loan at 75% ltv that was 3.375% with .75 discount on a 30 year fixed in March; priced out at 4.875% and a cost of 1.75 discount points. That same loan with a DSCR lender was 4.75% costing 2 origination at 75% ltv.

DSCR is real. Find a good DSCR broker and have a conversation. You'll be glad you did.

Stephanie

If it's now a rental, I would take a 30 year loan on it and still do the cash out.  If you want to pay it faster, then pay it like it's a 15 year if there's no prepayment penalty (and on Fannie/Freddie loans, there isn't).  That way you have the best of both worlds, you get the cash you need to do more loans and the ability to pay it down faster if you want while being safeguarded with a low payment in down times.