All Forum Posts by: Connor Hibbs

Hi Daniel,

You should look into DSCR programs. You'd likely be looking at 20% down and the main factors are going to be your FICO Score and the cash flow of the property. These will look at bank statements opposed to DTI or tax returns. You should expect a rate ranging from mid 6's to mid 7's and a 5-year prepayment penalty period. you can lower your rate by increasing your downpayment too.

You should look into a 203k loan. This would allow you to have a minimal down payment, low rate, allow you to live in the home, and it provides you with some rehab funds. You'd need to finish the rehab within 6-months of getting the loan, but this would be a great way for you to get a property and get started.

The most frustrating things that I've seen are poor appraisals, poor (or lack of) communication, and slow document collection.

POOR APPRAISALS: can ruin your deal. Whether it's the property value coming in way under what you anticipated, unexpected repairs that trigger "subject to" on the report, bad/no comps, or low market rents. Making sure that the property is in good condition and doing your own research (or having your agent look) for comps in both the home value and market rental value can help with expectations and save lots of time.

POOR COMMUNICATION: This is a 2-way street for the lender/broker and the borrower. If your lender waits to tell you that rates went before you could rate lock you'd be mad. If you're trying to rate lock a file and can't get a hold of the borrower, then suddenly rates go up, everyone is upset. Finding out that a property is rented by the room instead of a long-term lease can also impact your loan from LTV to interest rate. When issues pop up they should be addressed as soon as possible since the longer it's ignored the more painful it will be when it does inevitably need to be addressed.

SLOW DOCUMENT COLLECTION: This goes both ways with getting the docs to your lender and the lender reviewing them. On the lending side it can be very frustrating when someone gives a hard closing date then disappears a day after you create their file just to come back panicked about when they can close. On the flip side it would be extremely frustrating to send documents in just to find out that edits or corrections are needed days after you'd sent them in. To have the cleanest closing and most enjoyable process both parties need to send, collect, and review the documents in a timely manner.

Hi Brian,

This seems pretty predatory, especially if your mom would only be breaking even after 20+ years of owning the property. Unless she wants to sell her home, I'd recommend just ignoring this guy. If she does want to sell her home, then she should reach out to a local real estate agency and have them take a look. 

This guy is likely looking to rush the purchase and buy cheap, then sell the property days or weeks later for a significant profit to a potential house flipper or investor. Trust your gut on this one, don't let them force you to close on their schedule, and seek the advice of local professionals regarding values and contracts. If the sound of you doing research scares them off, then it's probably for the best.

Hi,

Your agent should be able to help you find comps for the new value of your property since completing the rehab work on it. They may also be able to help you place a tenant or get a better idea of what you should be renting the property for as well.

As long as you aren't currently living in the property then you can go with a DSCR loan. Most DSCR have a 6-month seasoning period from the purchase date, but there are several options out there from 0 seasoning (as long as rehab has been completed) to 6-months of seasoning.

Hi @Dave Harlan,

Your best bet for using the BRRRR method is to start with a hard money loan. These will provide funds for rehab and usually will get you around 10-15% for your down payment unless there is heavy rehab involved. The rates are a bit high being between 9.5%-13% depending on your experience, but they are interest only payments and get you funds fast. They don't have Prepayment penalty period either so once you finish up then you can go with a DSCR cash-out refinance.

This will get you in a 30-year term loan with a lower rate and you can usually get 75-80% as long as the property is cash flowing although I'd recommend going with 75% to make sure you keep equity as well as lock in with a good rate. The rates on 80% are typically much higher, although if you need to get over 75% to payoff your existing lien then you may be better off going with a rate/term in which case they can go up to 80% with lower rates and are going to be based off the existing payoff amount + covering closing costs.

Hi @Axel Scaggs, in this scenario you would be better off using a delayed purchase rehab loan to ensure that you have enough funds for all of the repairs that you want to complete on this one. Delayed purchase loans for rehabs will still allow you to get upwards of 75-95% of the purchase price (depending on your rehab experience and if you've completed rehabs in that area before).

After the work is done then you'll want to move forward with the DSCR. If the appraisal comes back as "subject to" then most lenders would need the repairs to be completed before moving forward with the DSCR loan anyways (foundation issues would prevent you from closing as a DSCR prior to that being repaired). This will also give you an opportunity to find tenants to figure out what the cash flow of the property is prior to locking yourself into a long-term loan.

If you have any other questions about this, seasoning, LTV's, etc... I'd be happy to help.

Hi @Kevin Liu,

The first step to finding the best lender for you is to narrow down what types of properties you are looking for and what types of loans you want. 

For example, a lenders expertise may be more in 1-4 unit properties that need rehab or refinance. This is great unless you are looking for commercial properties like warehouses or office buildings.

Things to look out for are also availability and consistency. If your lender takes a long time to get back to you then that could be problematic down the road if you need something rushed. Also making sure that the lender you're using knows their programs in and out. Having extra insight into their own programs will allow them to help make sure that you're going forward with the best option they have based on your needs.

Hi Erika,

If you aren't able to get an extension with your current lender then you may want to consider a bridge with a rate/term refi. The only issue that will come up is that when they see that it was recently listed. Going with the rate/term option though you should be able to cover the existing loan and get your rate a little lower.

There were also a good number of comments regarding selling the property above that you should consider as well. best of luck and I hope you're able to get it sold before your maturity date hits.

Hi @Eric Teran,

Your best bet is to do a rate/term refinance with this one. You also, may be better off doing a reduced PP option with a DSCR loan to be able to refinance once you get your credit up a bit more. By reducing your PPP you will increase your rate slightly, but you'll be able to get a lower rate (given the market stays relatively steady) if you have a higher FICO and cashflow in the future.
By going with a Rate/term you'll get more wiggle room on the amount you can draw given your existing payoff (Rate/term typically goes up 5% LTV from max cash-out). This also will have a lower interest rate than a cash-out does, and because you're taking just enough to cover your existing payoff and possibly closing costs then you'd have a lower monthly payment until you have your FICO and cash flow numbers where you want them.

If you want a rough idea of what this may look like I'd be happy to connect