All Forum Posts by: Tyler Warrick

We can go through multiple lenders depending on your needs.

Assuming great credit, and some experience: Mid to high 9s and this could take 2-3 weeks.

Assuming great credit, and some experience: Rate in the 11s (4 points), rate in the 15s (2 points) close pretty damn fast.

You could expect rates in the low to mid 7s for a One Time Close Construction Loan. These loans take more time, require more docs etc. 20% down requirement (you are closing one time for the construction -- includes land -- and the permanent loan).

You could expect rates in the 11-15% range for HML/PML. These loans are quick, and require less documentation. 10-15% down payment depending on experience.

If your plan is to sell/refi before the loan hits it's adjustment period, this seems like a no brainer (assuming there are no pre payment penalties). 

I always explain ARMs like so: If you plan a vacation out of state for 5 days, do you book your hotel for 5 days or do you book your hotel for 30 days? 

It's all about perspective, but why pay a premium for "comfort/stability" when you don't intend on needing it? It reminds me of insurance, haha. 

Also, if you do plan on keeping the property beyond that 7 year fixed rate period, are you expecting appreciation growth in there? If so, and rates do go up, you can always use that equity to buy down your rate. 

Another point: what is the loan amount? If we're talking about a $100-150k loan, the rate hardly makes a difference. However, if we're talking about a +$500k loan, every 1/8th of a rate lower could be a significant impact on your cash flow. 

Long story short: I would go with the ARM.

Hey @Ketra King, great question! 

There are multiple strategies. I'll do my best to detail them out briefly.

Ground up construction: there are HML/PML who will fund both the land and ground up construction all in one. These are great if you have experience, but can be a headache if you don't (some lenders won't even consider a borrower who doesn't have experience). You'll need to work with a General Contractor (GC) to get all figures dialed in before you get approved for the loan.

Land Loans: These are definitely doable, however the terms are not the greatest. Typically you need 30% down, expect a minimum of 3 points, loan amount greater than $100k and the term is typically amortized over 20 years.

One Time Close Construction Loans: These are becoming more popular, but can absolutely be a pain in the butt. This is a Conventional Loan, and it's where the lender will finance the land and construction all in one, however you are avoiding HML/PML's. This means the rates are better, but again the process can be a headache.

Each loans has it's pros/cons, so it's best to know what your goals are to know which route you should take. 

Hey @Michael L. great question!

HELOCs are great for quick cash needed, and ones where you'll pay down the balance relatively quickly (think 0-12 months). Keep in mind HELOCs are interest only payments, adjustable rates, and will eventually turn into a fully amortized loan (usually after 3-10 years).

Cash Out Refinances are great when you need the cash for long term needs or consolidating debt. These have added benefits of being fully amortized from the start, and lower rates than HELOCs. 

One of the most over looked things is looking at blended rate IF you are consolidating debt. Most cash out refinances will have a lower rate than the current blended rate (even if someone has a sub 3% first mortgage). However, if you are using a HELOC to improve a property it can be a great way to keep expenses low and refinance later when rates drop.

Great question, @Kingston Yi!

HELOC: Home equity line of credit. This is in addition to your primary mortgage. HELOC is an interest only payment, an adjustable rate, and you can draw funds up and down from $0 to your total line amount. Rates tend to be higher than cash out rates (due to the lender being in second position).

Cash Out Refinance: Replaces existing mortgage and gives you cash at closing. Fully amortizing payment from the start, predictable payments, known terms. Rates tend to be lower than HELOCs/other second positions liens (due to them being in first position).

Hope this helps!

Great answers for you to ponder here, @Cody Cavenaugh. How long has your business been making $20k/mo? I ask because I'm surprised no one suggested a bank statement loan. If you have 12 months of business/personal bank statements to support the $20k/mo, you could be looking at rates in the mid-high 7s with good credit and 20% down (assuming second home). 

We miiiight be able to do a 3 month bank statement, but the rates sky rocket. You would be getting much better pricing on a DSCR loan instead.

DSCR would be in the same ball park range of mid-high 7s with good credit and 20% down. Just keep in mind that DSCR loans have a Pre Payment Penalty (PPP). However, they are much easier loans to close (less documents).

Hope this helps!

Hey @Mike Gratzmiller! Great question, and I'll give you an easy way to see if it's "worth it." Every lenders rate stack is different, so unfortunately only your lender can tell you how many points it'll take to buy down the rate.

Break even point = (difference in cost) / (difference in payment)

If you think you'll refinance or sell the property before the break even point, financially it typically doesn't make sense to buy down in points (however, consider tax benefits if it's your primary as you may be able to write off the up front points -- which is considered pre paid interest).

In you scenario (assuming a 30 year loan), the difference in cost is $3150 and the difference in payment is $52. That would mean a 61 month break even point. If you think you'll refinance or sell before 61 months, don't do the buy down. 

Great question! A down payment for the loan doesn't sound right. The person you spoke with may be referencing earnest money deposit (buyer showing the seller they have skin in the game; this can be refundable or non refundable).

Some lenders require an application fee (junk fee) and those lenders typically are more expensive to begin with. Everything in real estate is negotiable. Keep that in mind.

DSCR, 3yr PPP, 750 credit, 65% LTV Cash Out: 7.874% (no points), 7.624% (1 point), 7.374% (2 points).

IO Options are usually 1/8th higher in rate. 

PPP is 6 months of interest on 80% of the original note balance, so for this scenario it's about 5-6k. I would highly suggest doing a 5 year PPP if you think the home will appreciate 5-6k by the time you next refinance.

DSCR, 5yr PPP, 750 credit, 65% LTV Cash Out: 7.624% (no points), 7.374% (1 point), 6.99% (2 points).

We crush TX