BRRR Refinance question

[Apar Bains]

Hi guys
I am doing a BRRR deal in Sacramento ca. my loan officer tells me that when I refinance the loan it will have to be 75/25 LTV. Is this information accurate? Is there an alternative solution to this where I can get 80/20 LTV?

Thanks 

[Andrew Postell]

@Apar Bains Generally speaking there are 2 main types of loans for investors: “Conventional” and “Portfolio”

Conventional - I'll define these as loans that come from Fannie Mae and Freddie Mac (if you recognize those names). These loans are all 30 year fixed rate loans. They have the lowest rates we can find and since they are 30 year fixed...they allow us to cash flow better...which helps us qualify for other loans later. The draw back to these loans is that they are more paperwork heavy than the other "portfolio" types of loans....but if you have ever received a loan on your primary home, it's likely that you will go through the same type of paperwork here with conventional lending. Fannie/Freddie money = Fannie/Freddie rules. NOT the bank's own money.  These loans do limit cash out on a single family investment property to 75%.

Portfolio - I'll define these loans as loans that come from the bank's own "portfolio" of money. Sometimes referred to as "commercial" loans. These loans are a lot more flexible than "conventional" loans. Bank's money = Bank's rules. If they like you, then maybe they will lend to you. But since there is a limit to how much money the bank has access to....their rate will be higher...and usually a shorter term. The most common portfolio style loan in Texas is a 20 year adjustable rate loan. These loans are easier to get but the terms are different.  Sometimes they might limit the loan to 75%....or even 70%....but also 80%.  You'll just have some other feature like a prepayment penalty, or adjustable rate, or more points/fees.    But when someone is saying "hey, I know a lender" that's great to have a recommendation and that's where I would say to start - with the recommendation.  Just know there will be some other feature here as well. At least, in most cases. I can't speak for all 8,000 lenders in the US here (that's how many different portfolio loans there are) but those things mentioned above are typical for this loan type.

I hope all of that makes sense.