All Forum Posts by: Stephanie P.

@Manan Patel

Rates have moved significantly in the past few weeks as inflation increases and with the Fed talking about 3 interest rate moves this year, the expectation is upward pressure on rates going forward. We are in a rising rate environment yet still enjoying historically low rates. Ask around at MeetUps and REIA's and get some quotes to keep your guy honest and if the answers you get are close, then move forward because rates aren't going down anytime soon.

All the best

Stephanie

@Scott Trench

No, I don't think so. Rates are subjected to so many variables that the answers could be misleading. Just like the OP said, multi family, state specific, owner occupied etc... Let referrals work. Good lenders get referrals, votes and mentions.

@Richard Cedars

The "seasoning period" is a generally called a prepayment penalty.  

If you're thinking of selling or refinancing, you can reduce the impact by paying it down (usually you can get it to 1 year with a point) or ask your mortgage specialist to use a lender that's prepayment penalty steps down  yearly.  Instead of having to wait 3 years and have the full prepayment penalty, see if the prepay is reduced year over year until it's gone.  Many lenders have that, particularly if it's a longer prepay like a 5 year.

Stephanie

@Adam David Graning

There are a lot of different guideline variances on these depending on the lender they go to and they've gotten much better than they were just a few years ago, but for the most part, you can get 75% cash out with rates in the 4's and low 5's on a 30 year fixed with no income verification.

These loans carry a prepayment penalty, require all properties be appraised, require each property in the proposed portfolio to have a value of at least 75K and require the property to be stabilized (no renovation and leased).  The caveat with these loans is it's difficult to break them out of the portfolio so if you don't want to sell them down the line or don't want to refinance one of the portfolio, it's not a bad way to go.  If that's going to be an issue down the road, just do the loans separately.

@Ryan Cleary

You really can't and still get conventional financing.  You're in Jumbo territory.

@Josh Calcanis 

DSCR can go for a max of 10 units depending on the lender. The rates are generally a point higher for 5+ units.

Most underwriters would question your motives.  Are you going from a large single family property to an apartment size dwelling and what's the crime like in the area you would be moving to vs. the crime statistics where you live right now.  The very least you'll have to do would be write a pretty detailed life letter explaining why you're trying to move into an apartment.  Shouldn't be too difficult, but will require an explanation.

If you can qualify for conventional financing and want to keep your property long term,it's definitely worth it to take the lower rates/fees; even if it's just a little bit.  Over time, it will be cheaper.

On the other hand, DSCR lending is the growth sector of the mortgage market for a number of reasons; the number of people who won't qualify for conventional financing because of student loan debt (and other debt, but student loan debt is huge right now), the number of financed properties, lower ltv's for conventional, the gig economy where a borrower can use deposits to qualify for income vs. a W2 and so many others.

DSCR lowers the barrier to entry for into investing in real estate where Fannie and Freddie are still trying to figure it out and with comparable rates or rates as low as they are naturally, DSCR is experiencing an explosion of growth.

All the best

Stephanie

@Josh Green

If you find it, shout it from the rooftops. I don't think it exists.

FHA is the clear winner when it comes to units right now.

@Alana Higgins

@Daniel Hennek is right about the guideline. I didn't want to get too far into the weeds and that's what a DSCR loan helps you avoid.

To give you a comparison, using a 760 score and a 300K sales price, this morning a conventional rate is close to 5% with a cost of a half point on a 45 day price. Lender's fee is usually around $1000. A comparable DSCR loan would have a rate of 4.75% with a cost of 2 points to the broker (typically, could be higher or lower, but that's what's typical in my world). The lenders and brokers fees will end up being around 2K +/- and there's a prepayment penalty with the DSCR loan (which, if you plan on keeping the property for more than 3 years is a non-issue).

With today's DSCR loans, the rate's a little better than conventional (crazy I know, but it is what it is) but the fees are higher with DSCR. Essentially, you're paying for a significantly easier transaction because no there is no income verification so no DTI requirement. The leases on the new property have to cover the cost of the mortgage. No fuss, no muss.

Hope that explains a little more succinctly

Stephanie