All Forum Posts by: Dennis Muno

Sounds like you've got a plan. Congratulations.

While the construction company has given you numbers, run your own numbers too to see if they make sense to you.

Do your due diligence(are there liens, restrictions, area of land, permits to begin, etc). It sounds like you have a plan but make sure you can corroborate everything the construction company is telling you.

Best of luck!

So, DSCR loans are conventional loans geared for real estate investors where the proof of income for qualification is not your personal W-2s/1099s or bank statements but rather the monthly rental income vs PITIA expenses(loan pricipal&interest, taxes, insurance, HOA if applicable).This is great because they do not use your income but if the rent will cover these expenses on the property every month.

Lenders usually look at the DSCR ratio to decide to lend and the loan pricing too. FICO is also key to pricing and approval. Varies by every lender.

DSCR ratio= monthly rent/monthly PITIA. So if rent is $1500/mo and total PITIA is $1000/mo,

DSCR ratio= $1500/$1000=1.5 ratio.

The higher your DSCR ratio and FICO, the better your pricing will be. Keep in mind that loan pricing is based on risk.Lenders generally will prefer to lend on a property with a 1 or greater DSCR. However, there are lenders who will lend down to a 0.75 DSCR ratio-your loan pricing will be high though.

Generally, DSCR loans will be a percent higher than residential rates although you can buy down your rate if want to as much as allowed by law. DSCR loans can be used for purchase, refinance, and cashout refinance.

 Absolutely brilliant and very well said. Money ruins relationships.Especially when you give and people don't give it back. Encountered it personally.

 I would be careful lending money to your friend. Money shows people's character and ruins relationships. I'm not saying your friend won't pay you bank(no one knows) but perhaps leave them to get a lender for them to do it. You said they have trouble getting money to fund the renovation. Why? Excess debt, low credit that leads to low approval?

Sometime we want the best for friends and loved ones. You sound like a good friend but it is also good to calculate our risks too. Nicely ask them to call up more banks would be my opinion. Best of luck to you

I would say that for whatever lender you decide to go with, check their pricing with two other lenders. As a consumer, it is in your best interest to shop pricing(interest rate, monthly payment, downpayment amt, etc) from a lender, before you close on a loan.

Best of luck to you!

Asking for more info:

Did the client just buy the house or has owned the house for a while with some equity in there?

Is the house referred to a personal residence or investment property?

Options for your client I can think of could be a HELOC or home equity loan.

I doubt a bridge loan is the right type of loan for this scenario. Usually bridge loans are very short terms loans used for buying another home while a homebuyer wants to sell their home. For example, if you own a home with a mortgage on it but want to leave it and buy another one, some bridge lenders will lend to buy your new home and then when your old home is sold, the proceed can be used to pay off the home.

For much larger construction, bridge loans are usually used to get the construction(vertical or horizontal or both) started and then rolled into a much more regular loan when the project is completed or refinanced out of by the property owner if the borrower wants a better loans

Oooh, that seems a lot. How much are you putting down? Ask your lender for an itemized fee worksheet before you continue. I get a sense you may be paying a lot of not needed fees.

What type of loan program is that(FHA, VA, Conventional, DSCR, hard money, etc)? Are you buying down rate? What are the fees?

I would say you should get a second lender possibly locally to see what they have to offer you. Get estimated loan pricing and then itemized fee worksheet so you know what all the costs entail

Yes, usually with the loan amount there will be issues finding lenders because lower loan amounts for some lenders are considered risk. However, there are ways to go about this. There are some commercial mortgage brokers that will assist you. They can connect you with help

Hello Katherine,

If you intend to buy using a real estate agent, yes, a preapproval will be the way to start. Most realtors will not show you houses until you have a preapproval letter. It lets the agent know how much(in $) of real estate you can buy. 

To get a preapproval letter, contact a loan officer or mortgage broker to assist you with that. 

For a realtor, I would recommend perhaps a google search for a realtor with the highest ratings. If a lot of people say someone is good, I would say you can trust their reviews.

I would also recommend you don't only call a bank. Call a few, give them your information(FICO, downpayment amount, potential purchase price before you start for loan pricing. This will give you an idea of what your monthly payment could be, as well as your rate and rate buy down options/ lender credit options.

Note: Until a rate is locked in, interest rates change multiple times a day. So, all you'll have is a quote.

However, before you start anything I would recommend you get a preapproval. Realtors will generally not assist you in searching homes without them having a preapproval letter that shows you can buy a home up to a certain amount