Cash Out Refinance

[Ahmad Moore]

I’m experiencing a slight problem that I didn’t know existed until now and it may just be regional. (Mobile, Al) The two banks I tried to see what the numbers would be regarding a cash-out refinance, they only do 75% of the purchase price + construction cost and not 75% of appraised value that I’m used to.

I did try a DSCR refi, and after several paperwork being submitted, credit score ran, appraisal bought, only to have my numbers change before signing the docs for closing-so that was a dud.

My question, who do you know that’s a reputable Union or bank that’s doing at least 75% of appraised value?

[Jake Baker]

@Ahmad Moore

It sounds like for the DSCR, either ratio was caused the adjustment, or the appraisal came in too low.

[David Pearl]

Quote from @Ahmad Moore:

I’m experiencing a slight problem that I didn’t know existed until now and it may just be regional. (Mobile, Al) The two banks I tried to see what the numbers would be regarding a cash-out refinance, they only do 75% of the purchase price + construction cost and not 75% of appraised value that I’m used to.

I did try a DSCR refi, and after several paperwork being submitted, credit score ran, appraisal bought, only to have my numbers change before signing the docs for closing-so that was a dud.

My question, who do you know that’s a reputable Union or bank that’s doing at least 75% of appraised value?

@Ahmad Moore - I understand this must be frustrating for you. I would be happy to take a closer look at the details of your scenario and see how we can help. I will send you a DM now. 

[Tarik Turner]

Sounds like it is more of a seasoning issue with the banks that you attempted to go with.
How long ago did you purchase the property? What was the reasoning for the numbers change with the DSCR lender?

[Erik Estrada]

So there is a few things I would like to point out here:

1. On a conventional loan, you will need to wait 12 months to do a cash out on the new appraised value. 

2. On a DSCR loan, the minimum seasoning requirement is 90 days for any cash out, however if the property's cost + rehab does not exceed 75% of the new value, there is no seasoning requirement.

3. DSCR Lenders will generally use the lower of the two market rents or actual rents. If there is no more than a 20% variance you may have a case to use the higher of the two as long as you can document two months of monthly rent.

4. If the goal is to do 75% of the new value, and you are running into DSCR issues, you can still do it on a No ratio DSCR loan. This may require providing extra documentation such as 12 months reserves, 12 months of mortgage payments for both the rental property and primary address. It will also come at a higher rate.

[Ahmad Moore]

Quote from @Tarik Turner:
Sounds like it is more of a seasoning issue with the banks that you attempted to go with.
How long ago did you purchase the property? What was the reasoning for the numbers change with the DSCR lender?

No seasoning issues. My banks didnt turn me down, I didnt move forward because their lending practices has changed within the last year. DSCR note change was due to market rents they tried to go with which wasn't correct at all and I didnt like the terms...

[Ahmad Moore]

Quote from @Jake Baker:

@Ahmad Moore

It sounds like for the DSCR, either ratio was caused the adjustment, or the appraisal came in too low.

 The market rents changed the scenario...appraisal came at 30,500 over. 

[Ahmad Moore]

Quote from @Erik Estrada:

So there is a few things I would like to point out here:

1. On a conventional loan, you will need to wait 12 months to do a cash out on the new appraised value. 

2. On a DSCR loan, the minimum seasoning requirement is 90 days for any cash out, however if the property's cost + rehab does not exceed 75% of the new value, there is no seasoning requirement.

3. DSCR Lenders will generally use the lower of the two market rents or actual rents. If there is no more than a 20% variance you may have a case to use the higher of the two as long as you can document two months of monthly rent.

4. If the goal is to do 75% of the new value, and you are running into DSCR issues, you can still do it on a No ratio DSCR loan. This may require providing extra documentation such as 12 months reserves, 12 months of mortgage payments for both the rental property and primary address. It will also come at a higher rate.

 Very insightful, thanks!

[Ahmad Moore]

Quote from @David Pearl:

Quote from @Ahmad Moore:

I’m experiencing a slight problem that I didn’t know existed until now and it may just be regional. (Mobile, Al) The two banks I tried to see what the numbers would be regarding a cash-out refinance, they only do 75% of the purchase price + construction cost and not 75% of appraised value that I’m used to.

I did try a DSCR refi, and after several paperwork being submitted, credit score ran, appraisal bought, only to have my numbers change before signing the docs for closing-so that was a dud.

My question, who do you know that’s a reputable Union or bank that’s doing at least 75% of appraised value?

@Ahmad Moore - I understand this must be frustrating for you. I would be happy to take a closer look at the details of your scenario and see how we can help. I will send you a DM now. 

 Thank you!

[David Pearl]

Quote from @Ahmad Moore:

Quote from @David Pearl:

Quote from @Ahmad Moore:

I’m experiencing a slight problem that I didn’t know existed until now and it may just be regional. (Mobile, Al) The two banks I tried to see what the numbers would be regarding a cash-out refinance, they only do 75% of the purchase price + construction cost and not 75% of appraised value that I’m used to.

I did try a DSCR refi, and after several paperwork being submitted, credit score ran, appraisal bought, only to have my numbers change before signing the docs for closing-so that was a dud.

My question, who do you know that’s a reputable Union or bank that’s doing at least 75% of appraised value?

@Ahmad Moore - I understand this must be frustrating for you. I would be happy to take a closer look at the details of your scenario and see how we can help. I will send you a DM now. 

 Thank you!

 @Ahmad Moore - I sent you a DM on here. Please check. Thank You. 

[Jay Hurst]

Quote from @Ahmad Moore:

Quote from @Tarik Turner:
Sounds like it is more of a seasoning issue with the banks that you attempted to go with.
How long ago did you purchase the property? What was the reasoning for the numbers change with the DSCR lender?

No seasoning issues. My banks didnt turn me down, I didnt move forward because their lending practices has changed within the last year. DSCR note change was due to market rents they tried to go with which wasn't correct at all and I didnt like the terms...

 You keep saying that seasoning is not an issue. But, it is not about being turned down. They are offering what you can do with your current time line. IF you want to use a CONVENTIONAL loan AND get 75% of the appraised value seasoning/Waiting period IS an ISSUE.  

Again, it is right here from THE source:  https://capitalmarkets.fanniemae.com/mortgage-backed-securit...

At least 5 folks who are in the business have brought it up, but you have dismissed it. So, I am not even sure why you would be asking a question if you know all the answers?  What is the point of it?

[Pat Lulewicz]

Based on an appraised value of $255k and rent of $1,600, you're running VERY tight on a 1.0 DSCR at these interest rates. Assuming 7.5% int (and I haven't seen a DSCR lower than this) at 75%, your Principal&Interest is already $1,337, not including property taxes and insurance. Did you get that feedback at all - that your DSCR was too tight or below 1.0? Otherwise, I have experienced a number of DSCR lenders try and bait&switch at the closing table or right before getting to closing because they thing they have you in a choke hold...good on your for walking if that was the case. I think more investors need to have the confidence to do this.

[Ahmad Moore]

@Tarik Turner, it wasn't a seasoning issue. My original banks changed their lending practices, although it may be temporary. Like I mentioned, instead of lending 75% of the appraised value, they're lending 75% of the purchase price+ rehab- that was the issue.

[Ahmad Moore]

@Jay Hurst, to address your concern as to why I keep dismissing seasoning wasn't an issue, because that is TO BE TRUE..lol!!  I think I wrote, and I don't feel like checking, and if I said anything different, I apologize.  I'll even expound further... my traditional banks DID NOT have an issue with me getting the loan, I decided not to do it because they, although temporary, are doing 75% of the PURCHASE COST + REHAB instead of the typical appraised value that I am accustomed to.

So again, I, myself did not move forward. Nothing more, nothing less.

[Ahmad Moore]

@Pat Lulewicz absolutely! I was willing and did lose what I paid for the appraisal and valuable time of submitting so much paperwork, but I think it was worth it! Btw, it was 2%, but don't tell anyone..smh. lol Yes, it was tight- I think I was looking at about $200 (wouldve been my lowest cashflow to date) but my plan was to clear up remaining debts and also its already written that next year my rents were increasing to $1900 anyhow so I was going to ride the wave.

[Erik Estrada]

Hey Ahmad, 

You can still borrow up to 75% of the new appraised value without a DSCR requirement and less than 6 months seasoning on a 30 year fixed. The rate will be high though

[Jay Hurst]

Quote from @Ahmad Moore:

@Jay Hurst, to address your concern as to why I keep dismissing seasoning wasn't an issue, because that is TO BE TRUE..lol!!  I think I wrote, and I don't feel like checking, and if I said anything different, I apologize.  I'll even expound further... my traditional banks DID NOT have an issue with me getting the loan, I decided not to do it because they, although temporary, are doing 75% of the PURCHASE COST + REHAB instead of the typical appraised value that I am accustomed to.

So again, I, myself did not move forward. Nothing more, nothing less.

 

I decided not to do it because they, although temporary, are doing 75% of the PURCHASE COST + REHAB

This is the definition of seasoning.  so, yes, it is a seasoning issue. Good luck! 

[Ahmad Moore]

Omg.. lol If no other details of the loan was given to the lenders how in the world would they know when I purchased said home? SMH. I’ll try next month the seasoning time would have exhausted and update the masses.🙂

[Dave Skow]

@Ahmad Moore- sounds like a plan ...plus hopefully rates will be a bit lower too 

[Jay Hurst]

Quote from @Ahmad Moore:

Omg.. lol If no other details of the loan was given to the lenders how in the world would they know when I purchased said home? SMH. I’ll try next month the seasoning time would have exhausted and update the masses.🙂

 They will require a settlement statement and the title commitment shows when title transferred when you purchased.  

[Ahmad Moore]

@Jay Hurst definitely! Thanks!