All Forum Posts by: Brittany Minocchi

Hey Jennifer!

Debt service loans all the way for your situation. FICO is still a factor (yours is high enough that you shouldn't have any concerns here), but we don't look at employment history, income or DTI. Instead, lenders want to see that the property's income can cover (or exceed) the monthly principal, interest, taxes, insurance and HOA (if applicable). Based on the info in your post, as long as taxes and/or HOA aren't crazy high, you should be good!

Biggest downside with this type of loan is the prepayment penalty - PA is one of the weird states where some lenders make you "buy out" the penalty, meaning you'll have higher fees or a higher rate. Not all of them do though. Just something to be aware of. If you don't have to buy it out, 3-5 years is common and a sale OR refinance in that time will trigger the penalty. It's usually structured as a stepdown. For example, a 5 year PPP would be 5/4/3/2/1 - a 5% penalty in year 1, 4% in year 2, 3% in year 3, and so on. 

Hopefully that helps, feel free to reach out if you have questions or need anything else!

Nope.

Hi Nuttalya - 

People tend to use the terms interchangeably so I always ask - are you looking for a line of credit or HELOAN (closed end, lump sum) second mortgage? Terms will vary between the two. It's easier to find and qualify for a HELOAN than a HELOC for an investment property.

Hey Ella!

Duplexes are a little easier than 3-4 units with FHA since they don't have to meet self-sufficiency requirements. As long as you're prepared to be a landlord and live next to your tenant for at least a year, house hacking is a great way to get started. Not only can you collect rent to go towards your mortgage, you're also building equity that can potentially be used down the road for your next home or investment.

Hey Gene!

Based on your post and other comments, it sounds like your rehab is extensive enough that the property isn't habitable. If that's the case, you'll want to start with a fix and flip (or hold) type of loan, complete your renovations, get it rented out and THEN refinance into a DSCR loan for a long term hold.

Your initial terms will vary based on your investment experience, but generally, you want to plan on needing 20% of the purchase price if you're a newer investor and the lender will cover 100% of the rehab. You will also need to front some of the cash to start the rehab before you get a draw approved with most lenders. The loan will be interest only for about 12 months (up to 18-24, but 12 is common) with a balloon due at the end. You'll want to have your rehab completed prior to the balloon coming due. Having a lease in place will help you as well - some lenders won't refi a vacant property.

For your refi, you're usually looking at 75-80% max LTV with a debt service loan. Seasoning periods (how long you have to have owned the property) vary between lenders, but 0-6 months is typical.

Happy to connect and answer any other questions you have, good luck! 

Not many local banks and credit unions offer seconds on investments, but if you can find one that does, rate would likely be a bit better. In the broker world, there are definitely options for both. HELOCs are much tricker than a closed end second - they don't typically allow you to close in an LLC and they are full doc qualification, meaning your FICO, employment history, income, DTI etc all come into play. Closed end seconds WILL allow you to close in an LLC and don't always require full doc qualification. CLTV is typically capped at 70% on both, MAYBE 75% on a closed end depending on credit. Expect rates for both to be double digits.

If a cash out refi makes sense for your situation, you may be able to go up to 80% LTV to access more equity. The rate will also be lower than either of the two previously mentioned options.

Happy to discuss further, feel free to connect. 

Hey Sam - 

1. Your credit, investment history and bank statements will likely be evaluated and you'll need to personally guarantee the loan, but you can close under your LLC. The debt may not report to your personal credit (unless you are late on or miss payments, then all bets are off)

2. DSCR is available for an LLC to use for purchase and cash out refis as long as you never plan to occupy the property yourself. Fannie/Freddie won't allow you to close conventional financing under an LLC.

3. Are you looking to finance both with one loan, or separately? Both on one loan may save you a bit up front in costs, but it'll make it more complicated if you ever decide to keep one and sell one. I'd recommend keeping them separate for that reason. 70% LTV should be doable as long as you qualify (LTV can be affected by your FICO scores). Your loan costs will come out of those proceeds, so you may want to bump it up slightly higher unless you want to cover those costs out of pocket at closing.

Happy to answer any other questions if you'd like to connect! 

Hey Paige!

Definitely an option in PA, FL you may be limited to 75%. Just a heads up, your rate will spike going from 75% to 80% and you'll need at LEAST a 1:1 ratio. Happy to chat if you'd like to connect!

Hey Kenneth!

I'm not in TN, but I am a broker with a ton (180+) different lenders. Happy to help if you need me! 

Is this for an investment property? You can do a cash out DSCR loan like others have mentioned, there are also HELOCs and HELOANs (second position like a HELOC, but lump sum instead of a line of credit) that don't require employment history, income, tax returns or DTI. Both use your FICO and income from the property to qualify you.

The cash out refi will have the lowest rate, the other 2 options will be double digit rates. Feel free to reach out, happy to help!