All Forum Posts by: Benjamin Giles

At this current point in the market I would look more at a prepayment buy down instead of a rate buy down, as you most likely won’t keep the rate you get now for the term of the loan. 
For the points available do you mean that you are allowed to buy down? Or what you’re being charged? Either combine into the same top line figure essentially, with the Max varying per lender but typically 4.25% max 

Happy to run through this further!

Hi @Benjamin Giles, happy to answer this as best I can from the DSCR lending partner perspective. This is based on a few dozen private lender programs that I utilize for my clients.

o Rate buydown ratio: Current norm is a 4:1 ratio, or 1% fee for 0.25% off of rate. A 3:1 ratio or 1% fee for 0.375% might be available. The rate that you buy down to is your rate for the entirety of your 30-year fixed loan - it is not a stepdown like you might see on some conventional loan products. Some programs will let you spend as much as you like to buy the rate down (to their rate floor), while others do have a cap of 3-5% max buydown like you mentioned.

o Seller concessions: The typical max allowed seller concession on a DSCR loan is going to be 2-3% of the loan amount. The rate buydown is simply a part of your closing costs, so if you work a 2% seller concession into your contract and want to consider that the 'seller-paid buydown' then that's up to you.

o Rate floor: You are going to eventually hit a rate floor with any loan program, or a point where you cannot buy the rate down any further. That varies from lender to lender. One of my favorite programs offers a rate floor down to 7.50% right now, but their par rates are more competitive (i.e. without a buydown). Another lender offers rates down to 5.75%, but they are more costly to get there.

I haven't seen this lately but be careful and read the terms - there are often terms in the mortgage that preclude using the second home as an income property or limit the number of days you can be paid rent on it. Violating the terms of a mortgage is mortgage fraud and can be a real pain if it becomes an issue.

 @Benjamin Giles    Any conventional lender should be able to do it. HOWEVER, your upfront fees will be hefty thanks to the loan level price adjustments (LLPA) on a 90% second home. LLPA's are more or less how much over a par rate. So, for 10% second home there is a 4.125% in negative adjustments.  

Fannie Mae LLPA matrix

it sounds like you are renting it out right now against the HOA's owner-occupied rules. so first and foremost, i'd consider not renewing the current tenant, and selling when the unit is vacant. do you really want to be in a position where the HOA finds out & either hits you with a huge fine OR makes you violate landlord/tenant laws and kick the tenant out mid-lease?

You say a refi doesn't make sense because of the high interest rates. And then you mention wanting a DSCR loan which will be even higher interest rate? Explain.

What's the upside you're trying to get to with the LLC? It won't limit liability. It won't add any meaningful privacy. It will make future loans harder and more expensive.

Start with what you’re tying to accomplish by doing this.

You also probably want to look in to what the HOA really did to their rules. I'm 99% sure they didn't say "can't be sold to an investor". That's as easy to get around as I'm buying it as my primary in cash. A month later, I don't like this place, I'm going to rent it out. More likely there's a limit on how many units can be rentals which won't affect you or your buyer. There's a 90% chance your buyer, especially the one offering the most will be an owner occupant. And if he/she isn't then there's a 99% chance they could buy a rental with an existing lease they can't legally break, and be just fine.