BRRRR CASH OUT REFINANCING CRITICAL STEPS

[Bryan Johnson]

HELLO EVERYBODY IM AT A STAND STILL HOPING SOMEBODY CAN GIVE ME SOME ADVICE ,CANT SEEM TO FIND THE RIGHT ANSWERS ANYWHERE.IM A BEGINNER AT REALESTATE INVESTING AND PLAN TO MOVE FORWARD SOON WITH PURCHASING PROPERTIES WITH BUSINESS CREDIT CARDS MEANING IM TAKING MONEY OFF A BUSINESS CREDIT CARD TO BUY AND REHAB A PROPERTY OR USE HARD MONEY TO BUY AND REHAB THE PROPERTY AND USE MY BUSINESS CREDIT/MONEY FOR THE CLOSING AND RESERVES. AFTER THE PROPERTY IS PURCHASED REHABBED RENTED AND READY TO CASH OUT AND REFINANCE WHAT DO BANKS NEED /LOOK FOR, I UNDERSTAND I NEED GOOD CREDIT WHICH IS THE NOT THE ISSUE THE ISSUE IS BEING THAT IM NOT USING MY PERSONAL MONEY AND IM USING MONEY OFF BUSINESS CREDIT WILL THERE BE A ISSUE WITH THE BANK ALLOWING ME TO USE THIS MONEY CAN I STILL QUALIFY FOR A REFINCE BEING THAT MY MONEY FOR CLOSING COST AND RESERVES ARE COMING FROM BUSINESS CREDIT ***ALSO DO BANKS LOOK AT YOUR DTI ?

[Andrew Postell]

@Bryan Johnson In the investing world there are 2 main types of loans: "Conventional, Conforming" and "Portfolio" loans.

• Conventional, Conforming - these loans are governed by Fannie Mae and Freddie Mac. They are the 30 year, fixed rate loans with the lowest interest rate out there. These are the loan types that most beginning investors try to receive because they allow you to cash flow so much better than other loan types. And since the loans are 30 year loans, the payments are lower which help you qualify for future loans. These loans are lower risk for the bank, the money is unlimited (they just go back to Fannie/Freddie for more), and you can find them at just about any bank. However, it means you have to abide by their rules. The loan has to "conform" to Fannie/Freddie rules. The 3 areas they review are income, credit, and assets. The whole "DTI" thing is a measure of your income in comparison to your debt (that they see on credit). So while many different measurements come out of those 3 things, those are the 3 areas that are analyzed. Good loans. A little harder to fit their qualifications.
• Portfolio - These loans come from the banks own portfolio of money. Their money. Not to be confused with lending you based on your portfolio. Sometimes they are referred to commercial loans. Since it's their money, the bank gets to call the shot. So they can lend to LLC's, maybe ignore income...all sorts of benefits to these loan types. But this money is more risky to the bank (so a higher rate is normal), and they have a limited supply...so they need it back sooner (so shorter terms). The most common features to this loan type are a 20 year loan, adjustable rate every 5 years, and at about 1 point higher than their Fannie/Freddie counter part. And since each bank could lend their money differently....that means you may have to call ALL the banks to find a good loan for you. In theory, there are 15,000 lenders in the US. So there could be 15,000 different portfolio loans. That's a lot of calling. Good loans for people who don't fit the Fannie/Freddie mold.

I would also recommend asking some specific questions with any potential lenders you are considering:

Questions for Lenders

1. When do you start using rental income to help me qualify? (the answer needs to be immediately)
2. How long do you need me to be on title to refinance? (this is important if you do need a short term loan to purchase then refinance out - and the answer should be 1 day...very important that it is 1 day on title is all that is needed to refinance)
3. What is my minimum down payment required? (not so important but if they only require 15% down on a single family home that is usually a good sign that you are working with a flexible lender)
4. Can I change title to my LLC?
5. Do you sell your mortgages?
6. What is your loan minimum?
7. Can you explain to me what your reserve requirements are?

I know that is a lot of information so feel free to tag me with any questions. Thanks!