Shorter Seasoning Period?

Question

Hey everyone,

I'm working on getting my team together in the Chattanooga, TN area and am looking for a lender. I've done a couple successful BRRRR's in Florida but the seasoning period with the lender I was using there was 6 months. This obviously isn't ideal when trying to scale, what types of lenders should I try to connect with to get a shorter seasoning period?

Thanks in advance

Spencer Tillman · Answer

Hey Robin,I'll send you some lender names from the Chattanooga area to connect with that our team uses/recommends. Hope it helps! If you need anything else, feel free to reach out.All the best,Spencer

Brittany Minocchi · Answer

If you can support using the appraised value with recently completed rehab, you may be able to do NO seasoning up to 80% LTV. These types of programs do tend to have a higher rate than if you were to wait until you hit that 6 month mark. Feel free to shoot me a message, happy to help!

Erik Estrada · Answer

Hey Robin, You can refinance and use the new appraised value without seasoning. There is a few ways to approach it. 1. Refinance 100% of the initial cost. Lenders will allow you to refinance up to 75% of the new appraised value as long as it does not exceed 100% of the initial cost (no cash out) 2. On a cash out refinance with less than 90 days, lenders will require a second opinion of value, which may require a second appraisal. If none of these work out, you can also wait 90 days to cash out refinance on the new appraised value without the stringent guidelines.

Stacy Raskin · Answer

You can do a cash out refinance on the new appraised value after 3 months with a DSCR loan. If you're thinking about using a DSCR loan-more info below: DSCR loans won't use your income to underwrite the loan. DSCR loans are based off of down payment, credit score and either actual or market rents so it helps to supercharge an investor's real estate goals and net worth.Here's a bit more in detail about how rates are calculated for DSCR loans:1. Credit score- the higher the best. 760+ generally gets best pricing for investment property loans with most lenders2. Loan to value ratio: The higher the loan to value ratio (LTV) is, pricing takes a hit. So your pricing will be higher for a 80% LTV loan than for a 60% LTV loan.3. Prepayment penalties- usually 1-5 year terms. The shorter the prepayment term has an impact on increasing the rate.4. Are you cash flowing the property? More on how that is calculated below. Is your DSCR ratio greater than 1-meaning are you cash flowing (according to the lender's criteria of mortgage, property taxes and insurance (and HOA) if applicable). Many lenders will not do a DSCR loan unless cash flowing. If they will do a loan with less than 1, the pricing takes a hit. This criteria is for 1-4 and 5-8 unit programs.I've included an example below to help illustrate this.So different lenders have different rates (which do vary even for DSCR loans) but these are factors they all consider.See example below:DSCR < 1Principal + Interest = $1,700Taxes = $350, Insurance = $100, Association Dues = $50Total PITIA = $2200Rent = $2000DSCR = Rent/PITIA = 2000/2200 = 0.91Since the DSCR is 0.91, we know the expenses are greater than the income of the property.DSCR >1Principal + Interest = $1,500Taxes = $250, Insurance = $100, Association Dues = $25Total PITIA = $1875 Rent = $2300DSCR = Rent/PITIA = 2300/1875 = 1.23DSCR lenders generally let you vest either individually or as an LLC. It's a great way to increase your net worth and these loans can also be used to pull cash out of a property as it appreciates allowing you to reinvest money into new deals. Happy to connect to discuss further.

Simmy Ahluwalia · Answer

@Robin Hopkins - so, we can do NO title seasoning cash-out Refi's in Tennessee. Also, in Chattanooga, we can do 100% purchase/rehab up to 70% of ARV (this is property dependent, though). Reach out.

Jay Hurst · Answer

We do not lend in TN, so not much help for, but we have a no seasoning product that we call the 2-Step. But, I would caution you to really understand the 90 day products out there. They are incredibly expensive and most of the ones I have seen have pretty awful pre-payment penalties. Just make sure to weigh the pro's and con's of just waiting the 6 months.

Brandon Beardt · Answer

Hi Robin,The shortest Title seasoning period I've seen is 90 days if you're looking to refinance based on the property's NEW appraised value. You can time it right and start the process before the 90 day period, however, you'll have to close on or after the 90th day to meet guidelines. Best of luck.

Nate Herndon · Answer

Hi @Robin Hopkins, I utilize three distinct loan programs that each have different ways that they can win on refinances - but they all have a 90-day seasoning requirement instead of 6 months. Sounds like that would be helpful in this scenario. I utilize these with many clients who are turning properties pretty quickly. We generally start around day 60 of ownership and close just after day 90. Will send you a quick DM to get connected.