This last step is tricky: Refinance! Can I do refi w/o a W2 job?

Question

I'm a self-employed real estate rehabber doing BRRRR for the first time. I do not have a W2 full-time job this year. When it comes time to do the last "R" or refinance with a traditional bank to pay off a hard money loan, would I need a W2 fulltime job to get the lowest possible interest rate and lowest monthly payment from a traditional bank?

Bobby Paquette · Answer

I've refinanced 3 BRRR's in the last year without using any of my W2 Income! Just need the right loan product/lender

Nicholas L. · Answer

you've gotten a lot of good answers already.

i am self employed and have both conventional mortgages and DSCR loans.  DSCR applications are often pretty burdensome - they may require tax returns, pay information, etc.  and you can get better terms with a better credit score.  but they qualify ultimately based on the property's income and not your DTI.

no, you can't stay in a hard money loan. that's not what they're for.  and, you may not cash flow with a DSCR loan.  that is just today's market.

if you want a specific recommendation for a DSCR lender i like the One Brokerage, David Greene's team.  past client.  not affiliated in any way.  responsive and knowledgeable team.

Carrie Matuga · Answer

I've done personally multiple cash-out refis (without having a W-2) using a DSCR loans. The key is the appraisal for both the property and the rental rates so that you remain above that 1.2 ratio. Happy to connect if you'd want to talk more.

Diana Paramo · Answer

I have a lender that I work with that takes self employed clients with no W2's and less than 2 years of self employment and gets them qualified and closed. I know they do refinancing because I asked recently. Let me know if you want to connect! He runs all communication through his select RE agents, so I would end up being your main point of contact.

Caleb Bryant · Answer

@Susan Tan some hard money lenders will have programs that will transition into the long term financing but is agreed to at the beginning of the process (before the rehab). This may be an option but it won’t give you the bank level rates. A smaller local community bank can often be an option especially if you set your banking up there. These rates would likely better than the hard money but still worse than the best terms you get with a w2 from what I’ve seen.

Stacy Raskin · Answer

These example numbers are for a DSCR loan after someone has refinanced out of a hard money loan. Generally, borrowers are looking to get out of hard money loans by selling the property or by converting the HML to long term financing like a DSCR loan. DSCR rates as of this post date are generally in the 8s and 9s depending on borrower and property details.

Susan Tan · Answer

@Stacy Raskin Is it even possible to have a cash flowing fully cccupied rental property that has a 12% interest rate  hard money loan?

Stacy Raskin · Answer

@Susan Tan, you don't need a W2 job to refinance. DSCR loans are an option. More info below on how those loans are structured.

Some DSCR lenders have 0 seasoning or waiting period to pay off a hard money loan. Some others have 3-6 months of seasoning or waiting from the close of your last loan.

There are DSCR lenders that have 30 year fixed options with a DSCR 1 ratio.

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? Is your DSCR ratio greater than 1-meaning are you cash flowing. 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.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.

Carrie Matuga · Answer

It means that if your mortgage payment +taxes+ insurance is 1000, rents must be 1200 or higher so that you have 120% of rent to PITI coming in.

John Chong · Answer

@Susan Tan No you don't need to have a W2 job for a DSCR loan. DSCR loans are asset based loans for real estate investors. The focus is on cash flows, FICO, and LTV/down payment.

This last step is tricky: Refinance! Can I do refi w/o a W2 job?

Most Popular Reply