All Forum Posts by: Stephanie P.

Quote from @Nolan Dalton:

I want to get approved for a DSCR loan. I have walked through a few properties that I know would cash flow. Where can I find a lender? I talked with a manager at my local KeyBank and she told me "There is no such thing as a DSCR loan. That acronym is used as a ratio to determine if a loan would cash flow to qualify."

This would be my 4th property. I am 26 years old and I work in the trades. I am open to all options of lending.

Congratulations on your success.  At 26, having 4 properties and looking for more is quite the story.

KeyBank man should be ashamed of himself.

I'd disagree with some of the assumptions in this thread.

Rate locks don't need to be for more than 30 days.  45 days can cost you a quarter point depending on the lender and it's really not necessary.

Always remember that origination points and discount points are two distinctly different things.

For us, some origination fees can be just 2 points and some are just 3 points. It depends on what you qualify for and what lender works best for your situation. 

Here's an example.  One of our lenders charges no points, but they charge a $1995 underwriting fee and a $600 closing charge.  Another lender charges 1 point and $999 to underwrite.  Either way, US Commercial is going to charge 2 points and a $450 processing fee.  Both lenders will go to 75% cash out.  Lender 1's rate is 9.49% on a 30 year fixed and Lender 2's rate is 7.5% on a 30 year fixed and both have a 5 year declining prepay.  Loan amount is 200K.  The borrower is a long term hold borrower.  Using just those variations of closing costs, Lender 1's closing costs would be (not counting our 2 points) $2595.  Lender 2 would be $2999.  But oh no, you paid a point!!  The monthly payment for Lender 1 would be $1680 and the monthly principal and interest payment for Lender 2 would be $1398.  Same 200K loan.  

Why would we send you to Lender 1 vs. Lender 2? Lender 1 doesn't require reserves. They don't care where the money for closing comes from and they don't need to season the funds. They just care that you have it and they really don't care if your property has a 1.0 DSCR or not. They want to make sure you have the credit and not much else. Lender 2 requires 6 months reserves. they want the borrower to document any large deposits and they want mortgage statements on any investment properties listed on the 1003.

The point is different lenders do different things and it's important to not generalize as a broker, but interview the borrower, find their pain points and marry them with a lender that will minimize those pain points for a successful close. 

Quote from @Christian Jones:

I closed on 14 properties in the Springfield, MO area at the end of November using a portfolio loan. The bank that we used just told me that they have frozen making any new loans and so I can't just get my rehab money from them. I have lots of equity in these properties. I'm looking for suggestions for how to finance my rehabs. I was counting on using the equity they already have. My partner and I are considering doing cash out refi or heloc through another bank or institution. Is this the best course?

Tough to make recommendations without approximate values. Doing hard money rehab loans and then refinancing out into a long term conventional (best) or DSCR (still okay) loan would be your best bet. The bank will have to break up the blanket to make this work.

Quote from @Erik Estrada:

Quote from @Todd Goedeke:

@Erik Estrada You are kidding right? You are supposedly a lender and don t know what banks give out non recourse loans where retirement accounts are involved? Check with some of the providers of self directed IRA and Solo401k accounts. All the account holders use non recourse loan lenders.There are forums on Bigger Pockets to further explain it to you.

 Good to know. I’m pretty sure you don’t know everything there is to know in your trade. So no need to be rude about it. Thanks. 

https://www.biggerpockets.com/...

Quote from @Christopher Lynch:

Hi All,

I bought my duplex in 2019 which was a house hack. I already refinanced to take advantage of rates. The cashflow is great and I’m locked in at a 3.2% rate. 

The problem is I want to grow my portfolio into the short term rental space and I have roughly 140k of dead equity sitting in my duplex. 

With rates up my payment is going to be significantly higher if I refinance. Is it a good idea to pull the equity out and use it to invest in a short term rental in New Hampshire using the 10% down vacation loan? Or should I do a HELOC and use that? Then payoff the HELOC with the STR cashflow.

My goal is to create more monthly cashflow. I feel short terms will help me achieve this goal. 

Any feedback would be awesome. 

I'd do the HELOC, but also consider another house hack. Pick a 4 unit in Providence. They're abundant and the money is cheaper than DSCR or investor loans.

Quote from @Account Closed:

Hi everyone,

I have heard a lot about DSCR loans, which sound promising for several reasons (feel free to give your opinion if you think otherwise). However, I'm wondering how to manage the disconnect between the common >1.25 DSCR requirement and the investor's goal of acquiring properties with upside, meaning that it shouldn't start out with the best NOI at acquisition. Would a DSCR lender only look at what would be the current rent roll and expenses immediately after acquisition, or would the lender consider reasonable pro forma with upgrades/improved market rents?

Thanks for your input.

 To answer your question directly, the lender will use the market rents on the appraisal or the current lease amounts; whichever is lower.  They will not consider you pro forma.

That being said, some will go down as low as .75 of the mortgage, so DSCR is very viable if you've got a below market tenant and can get them out.

Quote from @Scott Michael Gross:

Hi All!

My partners and I are relatively new in the game. We were undergoing our first BRRRR in the Pittsburgh area and were in the process with Civic financial services but they just paused new loans so we need to find a new partner. We were excited because they were offering us a non-recourse loan on a five year interest only that would convert into 25 year ARM, without needing wet signatures. Long shot but does anyone know of other lenders that can offer us these terms?

Thanks for all the help this community gives us!

 Interest only is pretty common.  Non-recourse is not.  I'm not sure about the wet signatures piece.  Many lender will allow digital signatures and will provide a signing service if not.

Quote from @Jackie Nguyen:

Can you roll your cash out refinance closing costs into your new loan? So say i bought a house for $200k, payed it off to $130k. And i got and refinance it to the new amount of let’s say $250k. That’s $100k-ish i can cash out. Can i use part of that to pay for the closing costs? Or do i pay closing costs first to receive said money. 
this is just an example, thank you in advanced!

That's how it's usually done.  The only out of pocket costs should be the appraisal and credit report.  The rest of the closing costs will be net funded so you'll get a check at the table for the loan amount minus the closing costs and escrows.

Quote from @Santosh Prabakar:

Quote from @Jay Hurst:

Quote from @Santosh Prabakar:

I bought a fixer in Oct 2022 in leander TX and due to market conditions lm unable to sell it. I plan to make it a rental and would like to do a cash out refinance for $125k. What are the rates for interest only refi? Will there be any prepayment penalty? Any big disadvantage of doing interest only? 

 @Santosh Prabakar    What do you think the value of the property is?  What do you currently owe on the property?    Those items and of course credit score will determine interest rate.  If there is a pre-payment penalty depends on the program you go with.  If you use a debt service coverage ratio program most in the market do have them although there are some without.  

The obvious disadvantage of the  interest only is of course not paying any principal, but as you likely understand there is very little principal paid in the first years of a 30 year amortization schedule so that is not always a big deal. The other is there is typically a rate adjuster for interest only meaning the rate is higher even if your payment is lower, but it still can raise your cost of interest. 

 The value of the property is around $360 to 380K and bought it with cash. Credit score is above 780.

 Using 360K for value, your max loan amount would be 270K (using 75% loan to value as a max).  If you only want 125K and the value is 360K, that would be great because your pricing would be maximized at 35% ltv.

Rates vary and there's a range to pick from. You can buy it down or buy it up to save points. If you were going to keep it for a while, with that kind of leverage, I'd buy the rate as low as I could and not worry about interest only. Many DSCR lenders have their floor rates set at 7.375%. The monthly principal and interest payment on a 125K loan at that rate would be $838 per month. On an interest only loan at the same rate would be $767

Hope that helps

Stephanie

Quote from @Javier Rosales:

Hey BP, is it better to get a mortgage loan with points to buy down the cost of interest, or no points to not have high closing cost?

 Javier

The guys have the right answers, but it's really up to you and your investment strategy.  If you're going to have this property for a long time, then buy it down a little, but if you're going to get rid of it right after the prepayment penalty time constraint is satisfied, then don't.  It's just a math problem.

Quote from @Nathan Grabau:

I would contact local banks/ credit unions in your area. Walk in to their main office and ask to talk to someone about real estate lending. It is likely you will be across the table from their VP of lending or a similar role. I would ask them what they are interested in lending on and the terms they have. I would expect 20-25% down, and a minimum DSCR of 1.25 most of the time.

 @Kathy Reyes

Welcome to Biggerpockets.  

I have to respectfully disagree with @Nathan Grabau

If you're a new investor and walk into a bank or a credit union and start asking to speak to someone about DSCR loans, they'll likely have you escorted out of the building. Just kidding. It wouldn't be that extreme, but it's likely they won't know what you're asking for because most banks and credit unions don't use DSCR products; even if you're speaking to their VP of lending not to mention the hassle and time suck of getting in your car and fighting traffic as you drive to the local credit union. Instead, do some research here on BP. Listen to podcasts and read books (they're in the education section of the toolbar above) and then reach out to some of the DSCR brokers here the site (there are a ton of us here). Send private messages and ask questions. I don't know anyone on here that would reject a new investor who has questions. Read previous posts that are pertinent to what you're looking for and get a good feeling for who's posting, what they're posting and I think this is imminently important, get a good feeling if they're right as validated by their peers. People disagree here all the time and the discourse fleshes out the people who know what they're doing and of course, the ones that really don't.