All Forum Posts by: Devon Harris

A second home is ::: in a vacation area that the borrower intends to use for themselves and NOT rent thus it has to be single family or condo.

DSCR is generally not going to cash flow at 90% on single family AND DSCR is ONLY investment not a second home you need to show lease and check at the end. The reason why DSCR can't go 90% is not so much as program and the numbers wont work. Market rents cannot cover principle interest tax insurance HOA and any MI so DSCR generally ends up being 70-79% to cash flow.

Your unit property might make the DSCR work at higher loan to value BUT units in a duplex or fourplex do not rent as high as single family as they are less desirable.

Those you spoke with need to be honest enough to tell you that second home with units was dead on arrival. You may find today that pricing is going to hold you back. Because the bond market is volatile all lenders are not offering no points loans or no prepay on DSCR. The fear of early payoff and loss is great.

Example sale price $350000 at 90% PITI is $3146 IF there is no HOA and no MI. Are MARKET LTR rents $3200?

A refinance is simply that. Refinancing the property that is currently financed, either by you or a third party. You can go rate and term or cash out. With a rate and term you are keeping the equity in the property (or whatever else you’re financing) and simply getting a new, and hopefully better, rate and/or term. Cash out refi is taking out equity from the property which appreciated, however the method of appreciation. 

A HELOC is a type of home equity loan that like Jasmin  mentioned is a line of credit, secured by your property. The rates will most likely be variable so holding it long term may not be advantageous to you.

They are both useful and can work in concert with each other. Let’s say you have a primary and get a HELOC to force appreciation on a distressed property. Now that property is worth more money and you can cash out refinance to pay off the line of credit and walk away with extra funds. Reinvest that capital so on and so forth. They each have their purpose and I wouldn’t necessarily compare them. 

Quote from @Harley Cedoit:

HELOC vs cash-out Refinance

So with a HELOC acts like a second mortgage on your property, you can actually get better rates than a refinance most of the time. I highly suggest for you to go to a big bank or a local federal credit union (you might find a better rate at a credit union) For a home equity line of credit. When you cash out refinance you are more likely to get a higher rates and it is more tedious of a process since it is like you're getting another full mortgage on the property. The benefit with a cash out refinance if you already have more than one mortgage on the property you can just refi into one big one, and have one mortgage payment. I would say the biggest difference between the two is a cash out refinance is if you need all of the money out of your home now, with the HELOC you have the flexibility to use your equity as you need & it is like a credit card, you only pay interest on what you use. Hope this helps!!

@Jason O'Day

Simple answer is no.

Unless your jurisdiction requires you or a person to hold a license to rent, then it would be the same for an LLC.

If you're moving your assets under your LLC, your most immediate question should be is your LLC and its Operating Agreement set up correctly? Then your next question, do you have a Will or Trust and how are they set up.

Pull out your LLC, LLC operating agreement, Will and/or Trust. If you died today, what would happen to your assets?

For example, you died today.  Your Will leaves your assets to ??????.  The will has to go through Probate and takes a year.  In the meantime, the bank is foreclosing on your property's because your beneficiary can't pay the expenses and the P/I.  You have money in the bank but since you didn't set it up under a TOD to the beneficiary and had a Will that has to go through Probate versus a Trust which could have given them immediate Legal access, all of your hard work not only goes down the drain, but you have tied up your Beneficiary into a legal mess.

You want to talk with a Trust Attorney and not your normal Attorney.

Hello everyone! My husband and I are buying our first property in Ocean Springs MS. We are out of state and can’t really drive around to look at the neighborhood. 
Is someone familiar with the area that can help give us some feedback? The property is located on 103 Grand Teton 

Please note the differences in the affidavits and commitments on investment purpose and amount of time staying at the properties for these two loan options...

You can put 10% down on a second home, that is fine for conventional. Rates and fees will be high right now no matter what you do. What everyone forgets to mention (because people like to sell DSCR loans), is the majority of DSCR loans have prepayment penalties. So even if the overall payment and costs are not that different, throw a 3 yr Pre payment penalty into the mix for a DSCR loan and that is a show stopper for me.

If you can go conventional, do it!  Better overall terms, just find the right lender with competitive pricing.

Quote from @Devon Harris:

Hello Bigger pockets members. Anyone have advice on mortgage lenders that provide 90%LTV in Ms for a vacation home loan?

It's always best to exhaust your conventional financing options before venturing into DSCR (and I'm a DSCR broker). The money is cheaper and although the qualification is more difficult, worth it in the long run. You should be able to get a 90% 2nd home with conventional financing if the lender doesn't have overlays.

From What I have seen 2nd homes you need to go to 85% LTV.

with regards to DSCR now we are talking 80% LTV