All Forum Posts by: Brittany Minocchi

Hey Colton!

If you DON'T want to pull equity out, you should be okay with just a rate/term refi. If you did want to pull equity, conventional financing requires 12 months of seasoning (time that you've owned the property) to use the appraised value. Conventional financing will also require that you qualify using employment history, income and DTI. A lender will use 75% of rents, 25% is deducted to account for vacancy/expenses.

DSCR loans don't require all of those things - your FICO and the income from the property are the main determining factors. Not sure if you own or rent your primary home, but not all DSCR lenders will lend to first time homebuyers and/or first time investors...just a heads up. DSCRs will have slightly higher rates and they also carry prepayment penalties, which kick in if you sell OR refinance the property within x number of years; 3-5 years is common. The penalty can be reduced, but there's a fee (or you take a higher interest rate). 

Not trying to make your head explode, but if you have questions I'm happy to chat! Feel free to reach out any time. 

Would not recommend borrowing $200k for the down payment, especially on your first investment property. You're financed at 100% and would be in big trouble if (when) ANYTHING went wrong....would the property even cash flow enough to service all of that debt? 

Do you mean a short-term loan on the property you're buying? If so, would the property be rehabbed? Or do you mean a bridge loan on a property you already own instead of taking a HELOC out on it? If that's what you mean - is that property currently for sale? if not, how would you plan to pay that bridge loan off before the balloon comes due? Your post is missing important pieces :)

Hi Maegan!

There are HELOCs available for investments, but most lenders will require that the property is in your name, not an entity. They also require you to qualify using your employment history, income and DTI. Rates will be higher than a cash out refi, but you may still come out ahead vs. refinancing your current mortgage if your rate is in the 3s. Can't say for sure with limited information though. You could also look at a HELOAN - still second position, but a closed-end loan with a fixed rate vs a variable rate line of credit. These WILL allow you to close in an entity, and some programs use the income from the property to qualify you instead of your employment history/personal income/DTI. On both options, you'll likely max out at 70% LTV, so you'll need a pretty good chunk of equity to make it work. There are minimum loan amounts to consider as well.

Happy to chat further if you'd like to reach out! 

If you're living in it now, you'll probably be required to have a signed lease in place as well as proof that first month's rent/security deposit were collected in order to get a DSCR loan (they're business purpose loans and don't allow owner occupancy). You'll see a hike in rate going from FHA to conventional in general (especially if your plan is to pull some of that equity), but you're also going from owner occupied to investment (if you plan on moving) which is another layer of pricing adjustments.

If your goal is less required documentation, DSCR is likely your best bet as most everyone as mentioned, possibly a bank statement program depending on your job structure. These loans don't require employment history, income, tax returns or DTI. Much more streamlined compared to traditional financing! Happy to chat further if you'd like to connect.

I wouldn't automatically assume DSCR rates will be significantly higher than traditional financing - that's not always the case. They do tend to be slightly higher, but that doesn't mean your deal won't work. It depends on the rental income, what you plan on putting down (20-25% is typical, 15% or 25% is required for conventional depending on # of units) For your owner occupied deal, you should be able to use a portion of the rental income to qualify and help offset your DTI a bit. Not all lenders are well-versed in these calculations. If you have any debts you can wipe out, that should help as well. 

Happy to chat if you'd like to connect!

What's up Angel! Nothing wrong with being a bit new - there are options out there for all stages of the game. 

When you say your house hack phase has passed, are you saying you DON'T plan to occupy a unit of the 4-plex? It'll strictly be non-owner occupied? Lending options will look different depending on your answer. As far as pulling equity from your duplex - totally doable! You've got 3 options: 

1. Cash Out Refinance

This will allow you to pull a portion of your equity and will replace your current mortgage (assuming there is one). If it's free and clear, that's OK too. If you ARE occupying, you'll need to be able to qualify using your income, employment history and DTI. If you aren't, there are other options that don't require those. Instead, the income (or potential income) of the property would be used for qualification. FICO is a factor in both scenarios. This option will have the lowest interest rate.

2. HELOC

This takes either first or second position (depends on whether you have a mortgage) and is a variable rate line of credit. Interest rate will fluctuate. Typically, you'll have something like a 10 year draw period with interest-only payments, and then the balance is amortized over 20 years. Most HELOCs will require that the property is titled to you, not an entity (like an LLC) and require using your income, employment history and DTI to qualify.

3. HELOAN

This takes second position and is a closed end loan, meaning it's given as a lump sum similarly to a "regular" mortgage. Qualification can be either of the methods I mentioned with option #1. 

Hopefully that helps! Happy to chat if you have any questions :)

Hey Joshua - 

I think I'd be able to help with this. Can you reach out with more info so I can dig into it a bit? Address, how long you've held title, estimated value(s), etc. 

Hope to hear from you soon! 

You should "intend" to occupy a property for a year with FHA, which it sounds like you'd be doing by the time it were to close. If you're refinancing to a business purpose loan that's totally fine, but chances are good you'll need a lease in place for the unit you were occupying so the lender feels confident that it's strictly going to be used as an investment property. Now if you didn't refinance rented that unit out before living in it for a year and changed your insurance policy to a commercial one, that could be problematic (just to give an example).