All Forum Posts by: Brittany Minocchi

I am in Ohio and also have buy and hold properties - happy to connect!

@Jacob Rickard if you're planning on living in it, DSCR is not an option. Properties financed with a DSCR cannot be owner occupied. For an FHA loan, you MUST live in a unit. That's the biggest difference between the two types of loans I've seen mentioned here. With a DSCR loan, a higher required down payment, higher rates and pre-payment penalties are very common. I usually recommend going with a traditional/conventional loan for as long as you can before turning to nonQM products (unless you have an issue with income, employment or DTI, then that's a little different), as they offer more favorable rates and terms.

If you/your partner have the ability to qualify for traditional financing, any bank or lender should be able to help. However, not all banks/lenders offer nonQM products like a DSCR loan.

 I know of someone that should be able to help and they’re located in Vegas, so familiar with the area. Happy to share their info if you’d like to reach out. 

@Christine Krevalin it sounds like you're moving in the right direction! My first piece of advice would be to cut out the law office, save your money and reach out to the creditors yourself. Been there, done that. Back in the day as a teenager, my husband had some health issues and ended up with bills in collections since he didn't have health insurance. We called each agency and negotiated much lower payments. If you can commit to paying a lump sum instead of setting up payments, you might be able to get a bigger reduction.

If you choose to go this route, you should ask for a pay to delete. Just because you pay off a bill in collections doesn't mean it won't remain on your credit, but if you ask for this letter, there's a chance you can get it wiped off. Also keep in mind that you're closing an account and while it's great to pay off those debts, that will have an effect on your credit score as well. This whole process will take some time, do not be in a rush. 

There are different types of loans depending on the situation. DSCR loans, for example, look at the cash flow of the property and don't require income documentation from the borrower like you'll find with a traditional loan. However, most lenders will want to see a score of 640 for this loan, and even then, your rate and terms won't be great. 700-720+ is ideal. These days, you'll likely need at least 20% down and they have more fees than a traditional loan.

You can look at conventional financing, but your income, DTI, credit, job history, etc. will all be considered. For a single family, you'd need 15% down. MFHs 25%. You can't get an FHA loan on an investment property unless you plan to move into a MFH and live in one of the units, then you can get away with FHA and 3.5% down. Don't forget to account for title fees, inspections, appraisal and other closing costs on top of down payment. I recommend that people have at LEAST another 5% for closing costs. It could be higher, could be lower, but that's a good starting point.

Credit cards aren't bad IF you use them properly. They are a great way to help build your credit back up. I usually tell people just to use it for a necessity, like gas, and then pay it down or off. To avoid paying interest, you could split it into 2 payments and still show a balance on your credit reports. For example - if you have a balance of $50, you can pay $25 before your statement end date. Then when you get your bill for the remaining $25, pay it off. This way, a $25 balance will be reported instead of $0, and it shows that you are able to manage your debt instead of always holding a $0 balance and you aren't charged interest.

Your income is good - work on a personal emergency fund and an REI fund. Don't wrap up all of your money in an investment and put yourself and your kids in a tricky situation.

Save up, get your accounts settled and work on repairing your credit. You don't want to buy a property and kick yourself because your tenant didn't pay rent, and now you can't make the mortgage payment. Or worse, your own mortgage payment because all of your money is wrapped up in your investment. Things can and will go wrong, you just don't know when, so preparation is vital. I'm happy to discuss anything I've mentioned in more detail if you need me to, otherwise good luck on your journey! 

 You're welcome! The benefit of Section 8 - especially in your situation where you're cutting it close - is that a large portion (if not all) of the rent would be paid by Section 8, not so much to assist in finding a tenant. Good luck and I hope everything works out for you!

Is your property in the Cleveland area? From what I've seen, many people don't seem to want to take a chance there because of the POS violations and so much red tape. If that's something you're willing to deal with, I'd hang tight since you're already in it. You also might want to consider self-managing and finding a good maintenance guy that can be your boots-on-the-ground. That'll save you a bit. If you're willing to consider Section 8, that could be a help too. People have mixed feelings but in my opinion, you have a chance of having a bad tenant whether they're section 8 or not. I personally have had decent luck renting to Section 8 tenants and am also in OH, and Section 8 pays some or all of the rent depending on the tenant. So even if the tenant doesn't pay their share, you're not at a total loss. 

If you're just looking for a loan of $15-$20k right now, your best bet will be private money or a local bank. Most lenders have minimums of at LEAST $50k, many are $75k-$100k. Once the property is acquired, improvements have been made and property value increases, you could look at something like a DSCR loan. DSCR loans use the property's income instead of your income/DTI to qualify you. If you decide you'd like to discuss further, feel free to reach out!

 I'll second everything @Jack Mawer said - DSCR is a great option for the reasons he mentioned, and I'm guessing one of them is why you want something non-traditional. Most lenders that offer DSCR loans can do both purchases and refis.

Hi Erika, as others have mentioned the biggest difference between DSCR and a conventional loan is the fact that instead of looking at YOUR income to qualify you, a lender looks at the income of the property. A few other notes - this is a higher risk loan for a lender compared to a traditional loan, so you may find that they have higher down payment requirements, higher rates and/or prepayment penalties. Not all lenders will use STR income to qualify you and will instead look at market rents. This could cause an issue with meeting the debt service requirement. You'll want to make sure the property's income is high enough to at least cover the debt service (1:1 ratio). If you're looking at a DSCR on a short term property and a lender uses market rents to qualify, you may not meet this requirement. Something to keep in mind! Happy to chat further if you'd like to reach out, but I hope that helps a bit.

So far, I only know of one lender with no seasoning period that uses appraisal value and not purchase price + cost of improvements, but rates can get wild. DSCR isn't even a factor.