First Deal Financing

[Nadia N.]

Hey everyone!  I’m in the beginning stages of trying to figure out a game plan for the purchase of my first rental property and looking for some advice. 

My original plan was to BRRRR a LTR using the money from a HELOC on my primary residence to buy the property in all cash then refinance afterwards.

I'm currently in the process of obtaining the HELOC with the potential to have about $100,000 in that LOC but the bank is already telling me my DTI would not allow me to tap into that much. If I'm already having issues with my DTI, how will I be able to refinance after I purchase the property with my DTI being even higher?

Also, from my understanding of the BRRRR method, you should find a lender that will refinance the property from the beginning before you purchase the property. How does that work?

I’m a little lost and would appreciate guidance or any tips would be greatly appreciated.

[Steven Goldman]

Nadia this is a common problem. The funding companies who are private lenders will make you a debt service coverage loan based only on your credit score and the minimum debt service coverage. You will pay a higher rate becuase thi is considered a Non-Qm loan. The current range is 6.25-7.5. They will refinance using the ARV six months after your purchase. You should get an approximate refinance quote before signing a contract. That will insure you have a sufficient spread between your current value, and your after repair value to get most of your capital out. 

Because of rising rate you must create enough space between CV and ARV to make sure you can recover your money on the refinance. Good luck!