DsCR loan breakdown

[Zachary Vanison]

Hey bp family I’m Zachary I’m a beginner  a week in to be exact  but I took my first shot at  at   a FH a loan unfortunately due to the lack of income I brought in  I didn’t get approv so I look for other options and I ran across the DSCr can someone explain or give me a book that talks about it so I can study it to meet the criteria‘s and get my first rental property and more thank you guys for your time.

[Doug Smith]

Hi @Zachary Vanison. I happen to do those loans and I would be happy to help. For a 1-4 family property, we'll do a traditional FNMA appraisal, but we'll add a form 1007 to it, which is where the appraiser gives us the market rent for that property. That will go on top of the division problem (the numerator). On the bottom, we'll add up the loan's principal and interest payment, monthly taxes, monthly insurance, and monthly HOA payment. That will be in the denominator. A positive cash flow is 1.0 of better. The higher the number, the better. We can do below 1.0 for experienced investors, but you'll want a property that positively cash flows. Here's what else we typically ask a customer for. I am cutting and pasting this from what we ask for. We ask for a couple of odd items to help get the client the best deal. I hope this helps you.

Items Needed To Submit Your Loan To Processing: 

• Guarantor Application: (NEEDED FOR PREAPPROVAL): Each lender is going to have their different version of this. Complete one application for each Guarantor. Fill in all boxes the best you can. Each owner of the entity with a 20% or more interest must complete this application, but you can do it separately. 
• HUD or Sales Contract:For a refinance please provide the HUD from when the property was purchased. For purchases please providefully-executed sales contract complete with all addendums. If you are getting the property from a wholesaler or other assignor, we need a complete, fully-executed copy of the assignment as well.
• 2 Months Asset Statements (NEEDED FOR PREAPPROVAL): Please provide 2 months bank & brokerage statements, all pages (even if they are blank).
• Survey:The title agent will need a copy of the survey. If you have one, great. If not, we’ll need to have one ordered for you.
• Entity Documents (NEEDED FOR PREAPPROVAL):
  1. LLC/LLP

i.Copy of Articles of Formation/Incorporation

ii.Copy of fully executed Operating Agreement/Partnership Agreement (all pages & amendments)

iii.Certificate of Foreign Qualification (if applicable)

1. Corporation

i.Copy of Articles of Formation/Incorporation

ii.Copy of fully executed Corporate Resolution designating authorized signer(s) for the Corporation

iii.Copy of fully executed Corporate Bylaws

iv.Copy of stock certification

v.Certificate of Foreign Qualification (if applicable)

• Identification (NEEDED FOR PREAPPROVAL): Copy Driver’s License or Passport for each Guarantor.
• Experience – Last 8 Settlement Statements (NEEDED FOR PREAPPROVAL): A big portion of how aggressive we can be with our terms is your experience. We need to show underwriting what your experience level looks like. Please provide us with a list of properties that you have flipped in the past including dates, addresses, amounts, outcomes, etc. Please provide us with no more than the last 8 Settlement Statements from your past transactions.
• Insurance Information: We will need a copy of the binder or declarations page for the property hazard insurance and, if applicable, the flood insurance. Be sure to get us the name, phone number, and email address for your agent(s). Also, for properties of 5 units or more, we need to get a copy of your general commercial liability declarations page.

***IMPORTANT*** Whenever you apply for a loan, the credit reporting agencies will give your information out to solicitors. Your phone is likely to explode with unwanted calls. To avoid this, you can first go to Opt Out Link, scroll down to “Electronic Opt Out for 5 Years”, complete the form, and submit. The major credit reporting agencies will remove you from the lists they provide to solicitors for 5 years. That will keep your phone from ringing off the hook for a while.