All Forum Posts by: J. Mitchell Bernier

So without know much more than what you posted. If they can't buy the house from you due to their credit history and or income, get them to sign a long term lease for the same amount of the payment. Most community banks will see that lease and add the extra income to cover the debt payment. Allowing you to have a lower DTI. The lease will have to be for at least a year and you will probably have to show history of it being rented, but that is the simplest answer for your complex problem.

Good Luck!

So if you are talking about refinancing the balance on the HELOC, then in most cases it will go away. For example, let say you have a house that is work 100k and you have a heloc for 75k. After the refinance you will have a loan for 75k with no HELOC anymore.

If by chance you have a lot more equity, some places will allow you to move your HELOC to the 2nd position but your rate will go up of course. Same example as above except your Heloc balance is 30k so you keep a 45k Heloc as a 2nd lien.

Good Luck!

@Tony Gunter Yes we have done a few of those in South Georgia. Pretty similar terms on a standard commercial construction line of credit.

20% down

12 month term

Interest only payments

Floating rate against prime.

Let me know if you are asking for any more specifics, but yes it is possible.

Thanks again!

@Bobby Clair that is correct. The the income of the borrower and the deal should not exceed 1.25 times the total of existing and new debt. Doesn’t really matter that it’s a primary residence.

Now there are exceptions, one being that you don’t have 1.25 DSC but you have 36k in residual income. So let’s say you have 200k income and 165k in debt payments with the new deal. Well your DSC is around 1.21 but because you still have over 3k a month to live off of it would still potentially be ok to approve the loan depending on the rest of your financials and relationship with the bank.

Hope that helps!

@Ari Hadar That truly depends on the type of deal and the strength of the borrower. I would say 3-6 month is a good baseline for that though.

What we do is look at a Global DSC, so we take into account not only can the deal cash flow itself, but also if there was no income from the property could the borrower carry the debt as well. We try and stick to a DSCR of 1.25x or better and that takes into account you having at least 25,000 in available income to live off of. So yes it can hurt, but it is not a deal breaker. Good lenders look at the whole picture of each borrowers financials standing.

The promissory note would not be the biggest issue, some lenders are ok with taking a 2nd even on investment property. The bigger problem will the available equity. Based off your scenario you only have 25% equity. Most 2nd lien positions want to see no more than 70-75% Loan to value, and you are 75% right now. So without considering your financial standing I would say that is the biggest issue. 

I am still currently buying and actually had a closing yesterday. My strategy focuses on section 8/ DCA housing so not to concerned with eviction moratoriums.

Trying to take advantage of these low rate environments and refinance to increase cash flow and continue to grow. As I have a full time job and my investing is on the side, I am being a little more aggressive as all my cash flow is being poured back into my business. Don’t take any draws right now.

@David M. Yes David I would agree that is a lofty and high goal for college. I also would agree that was colleges initial intentions of educating people.

However, I think what most recent graduates are finding, at least in my circle of friends, is that’s no longer the case. Again just my personal perspective.

@Lawrence Harris I guess it truly depends on the curriculum, but I would say no. I have a finance degree for my undergrad and looking back I wish I would of done economics and marketing. Here my three reasons. 1 for why not finance, and 2 for why economics and marketing.

1) Why not finance, because college is meant to train you for a job. So finance classes, at least in my case, focused on being good at an analysis on stocks, companies, and real focus on corporate banking. Their goal is get you to work for those companies and work your way up into a CFO role. Out of the 2 years of focus on major only one class, finance 1101, was helpful in trying to become financially free because it focused on the basics of investing.

2) Why marketing, because marketing is selling and every type of industry has to sell. No matter if you are in finance, real estate, farming, etc you must now how to sell a product or yourself. Marketing helps teach you how people react to certain ads or pitches. Also it helps you understand why people choose X over Y. This can help you greatly in your overall business future no matter what it is.

3) Why economics, because economics teaches you on how to understand/read the broader market movements. Finance teaches you how to analyze a single investment, while economics teaches you how to analyze a whole market. So again no matter what the business model you can better grasp at when and what to buy, when and what to sell, when will be good time for expansion of product, when would be a good time for a new product and so on.

Hope this helps in your decision!

Good luck