All Forum Posts by: Nghi Le

@Sherief Elbassuoni @Whitney Hutten You guys are scaring him with your timelines.

If you go to a mortgage broker, they can usually get it done within 30-45 days and their pricing is pretty competitive too.  I've even seen plenty of recent cases where they close a conventional loan in 2-3 weeks (usually only with an appraisal waiver).  Although this was on a primary residence, I saw one close a cash-out refinance in less than 2 weeks by having loan docs sent out to escrow 3 business days after the borrower approached the lender; it still took 8-9 business days to close because of mandatory waiting periods on primary residences (such as 7 days from the CD and the 3-day right-of-rescission period).  I can recommend some local mortgage brokers if you need it.

If you don't qualify for a conventional loan, try an asset-based 30-yr fixed DSCR rental loan (to your LLC). Those usually close in about 3 weeks and are much less of a headache to get than a bank loan (no DTI concerns, no tax returns, etc); you can be unemployed and still get a DSCR loan, as long as the property's cashflow supports it. Rates are going to be a bit higher than a bank loan though (averaging around 5%), but you can get as low 3.75% if you pay additional points upfront.

I just refinanced an out-of-state property last month (so not Seattle although I do live here). I had tried to do a conventional loan on it since last summer, but after 6 months of the lender continually asking for more documents, I canceled the loan and went the asset-based DSCR route (which was good because changing title from the LLC to my personal name was also becoming a headache). It was minimal documents, almost like a hard money loan. My rate was 4.625% so it wasn't too bad. The only thing I was unhappy about was that they closed it too fast... because two weeks later they announced that rates had dropped and said mine would have been 4.00%.

Originally posted by @Mary Aviles:

@Matt Nico  I used Finance of America Commercial.  They are a nationwide lender. PM me with your location, and I'll have my agent find your closest office.

@Nghi Le I guess I disagree that commercial lenders require as much documentation as conventional. Every commercial loan I've used required almost no documentation. All they ever ask for is to fill out their application, and if you're closing in your entity,  the operating agreement.  Then they pull my credit and order the appraisal.  That's it - no PFS, no tax returns, nothing.

I closed on one loan with Finance of America on Wednesday and I'm waiting to close on another one on Monday. Quick, easy, very low fees, great rates, great service. The quote of 5% was for a 75% LTV, but I did a buydown to 4.75%. My appraisal ended up at 60-65% LTV, but the rates would have been the same. I think you missed one of the fees I mentioned above:1% of the loan plus $795 application fee. But that's it for lender fees; this is pretty good. The 1% buydown points are optional. They have a 5 year step-down prepayment penalty, which is very acceptable.

The 1st paragraph of my post was referring to commercial banks; FoAC is definitely not a bank and I would label the product that you received as more of an commercial asset-based loan, like what Lima One, LendingHome, Civic, LendingOne, Visio, CoreVest, etc has.  There are some differences between a commercial/portfolio bank loan vs. an asset-based loan, and it's mainly rates and points.  The loans that I had received from my favorite bank pre-COVID had rates in the high 3's with no points; nowadays their rates are even lower (high 2's), but it's much harder to get a loan from them now due to all the COVID overlays they've put on.

I separate points from fees.  1-2pts is pretty normal for an asset-based loan, but I've seen fees vary from $500 to $3,000.  I'm assuming you also paid for an appraisal, which I would consider a lender fee as well (since the lender requires it and underwrites to it).  But being all-in for 1pt and < $1,500 in fees (including appraisal) is pretty good, even with a 5-yr prepay.

Pre-COVID, I was getting these asset-based loans with 0.8x market rent DSCR requirement, no hard pulls (soft pull only), and 80% LTV cash-out with 2-week closings; I'm still waiting for that to come back.

Originally posted by @Mary Aviles:

@Jennifer Donley I have used several lenders over the years, but I've settled on one that I like and has good rates and terms. They're called Finance of America, and they're a nationwide lender.

As an FYI, I am refinancing two properties with them this week, and here's the information:

30 year fixed

LLC

5-5.5% base rate, but I'm paying a 1% buy down to get to 4.5-4.75%

1% fee and $795 application fee

They only requested an application, LLC documents, credit report, and appraisal

I have very good LTVs (60-65%), and high credit score, so your numbers may differ.

Please let me know if you need more information.

Let me know how your experience with FoA goes. Those rates seem comparable to mine (although I'm curious what the rates would be if you asked for a 75% LTV cash-out). I think my rates would have been 50-75bps lower if I had asked for a 60-65% LTV rate-term refinance. My problem in my past experience with FoA was just a lot of fees. If it's just a $795 fee + appraisal fee at the end of the day, that's not too bad at all.

That buy-down ratio seems like a 1:1, which is almost unheard of. I usually see somewhere around 3:1 or 2:1. I'd always take the buy-down if it's 1:1. By the way, is it a 5-yr prepay or a 3-yr? Mine was 3 years, and could have gotten a lower rate with 5-yr, but the rate difference didn't seem worth it to lock me in for another two years.

As someone who has borrowed from a few dozen lenders and talked to a couple hundred of them, I agree but also disagree with a lot of what's said here. I don't necessarily think commercial banks are easier than conventional, but that may be because I understand conventional rules very well (since all conventional lenders have to follow Fannie/Freddie guides) and know how to get around it, whereas commercial lenders all seem to play by different rules, so I'm constantly surprised and don't exactly know what to expect. Banks, whether it's conventional or commercial, still want too many documents. Almost all the commercial bank lenders I've talked to wanted tax returns and a PFS. 

COVID had definitely changed things though, and COVID overlays still exist. A lot of national commercial banks haven't returned to their normal lending (and I hate those 5-10 year balloons anyway). And I just tried to do a conventional loan on my MO property. It took 6 months and they were still asking for more docs every couple weeks. So I finally canceled it, went with an asset-based lender who could do a 30-yr loan to my LLC and got 4.625% for a 75% LTV cash-out. I closed the loan in 3 weeks, no headaches, no tax returns to submit, no PFS, etc. It's not the cheapest commercial rate, and I had to pay a couple points to buy down to that rate, but as an investor I care more about execution than chasing the lowest rates (as long as I have a decent rate). The entire 6 months of that conventional loan, I couldn't buy anything, I couldn't refinance anything, I couldn't do large withdrawals/deposits in my bank account... It completely blocked me from investing.

Please add me as well.  Although I think a Zoom meeting might make more sense right now.

Originally posted by @Joel Jennings:

@Nghi Le thank you for your response! I had hoped I could BRRRR this property with some success. I realized that some of the improvements were made to make one of the units comfortable for us to live in long term and that we wouldn't get all of our capital back from refinancing. Doing the numbers now it seems my issues are that we 1) paid market value 2) paid 15% down making it harder to get the money back out considering the banks would only mortgage 75% of the value.

My goal is to successfully BRRRR the next deal. With that in mind what would you recommend?

Theoretically you could rate-term into a loan at 85% LTV on a duplex that you're living in. However, you'd probably want to cap it at 80% LTV to get rid of PMI. I imagine you're paying for PMI right now?

You do need to know your ARV in order to know your LTVs and whether it's worth it to refinance. A website like Pellego might help, but a CMA from an investor-agent or a full appraisal would be more accurate.

HELOCs are better meant for something where you can pay it back within a year, such as BRRRR (where you recoup your down payment) or private lending. If you plan on using it as down payment on another property and it's going to get stuck in there, then it's best just to do a cash-out refinance. You don't want to be stuck in a variable rate product long-term.

Or... depending on what your current rate is, do both (refinance into a lower rate and then put a HELOC on top). If you're going to go the refinance route, I can recommend a mortgage broker that's fast and has good pricing. As an investor, you want someone that can execute, not just someone that taunts low rates but takes months to close. She's the only one that I've ever seen get loan docs out (on a conventional cash-out on a primary) to escrow in 3 business days (from quoting the client). Of course, due to conventional guidelines on mandatory waiting periods (for primary residences), the borrowers had to wait a few more days to close. I doubt she closes every deal like this (i.e. can't do much when you have to rely on an appraiser), but to witness this instance was amazing.

For a HELOC, go with the local credit unions. BECU is the most popular, but that was pre-COVID... nowadays they're all over the place.

@Bobby Gill 10% and 3pts seems expensive for CA, even if it's for a brand new investor. I think it should be 9% and 2pts max. Your fees are also a bit high; I'd expect $1000 - $1,500, usually including the appraisal cost in that. You don't need a "LOC" (I hate it when HMLs use this term to describe a pre-approval) if it's only for $500k.

@Steve Felt 95% LTC at 8% for new investors... it sounds a little scammy.  But I'd love to see the details.

@Kevin Ivey We're in the same market.  I'm typically paying 8-9% and 1-2pts for 12-18 month loans up to 90% LTC.  Are you still borrowing from the local ones charging 12% and 2-3pts for 6 months?

@AJ H. That's interesting; I don't have that constraint. When I see people buying SFRs under $100k, I tell them to buy multifamily to get the values up so they can get financing. You should be able to get financing for a 4-plex worth $200k.

A lot of people on real estate forums get confused between different long-term loan options for refinancing a BRRRR, especially between conventional mortgages and 30-year asset-based loans (typically from a national hard money lender). You have to first identify what kind of loan you're looking for (or talking about) before you compare terms so that you can actually compare apples-to-apples. They each have their pros and cons, highlighted here:

Keep in mind that we are talking about non-owner occupied investment loans; I still see several cases of investors shaming each other because one got a 2.5% interest rate on their primary residence while the other got a 3.5% rate on an investment property conventional loan.

The main point is that conventional loans are going to be your cheapest option for a 30-year loan, but they are more of a headache to get. Asset-based loans are faster, more flexible, and less docs (i.e. no tax returns, no pay stubs, etc), but at a higher cost.  Someone who doesn't have a strong, stable income (or even no income) would probably want to go towards the asset-based side, whereas if you have a strong W2, don't own too many assets, or the property doesn't cashflow well, the conventional route may make more sense.

There are also commercial/portfolio loans (typically from banks), which is a different world.  They are harder to generalize since each of them make up their own rules, and there are so many of them, most of which are pretty localized (i.e. just because someone found a bank with amazing terms in TX doesn't mean someone in IA can get that).  However, they are usually somewhere between conventional and asset-based, although with shorter terms and amortizations (which can affect your ability to cashflow and ultimately the loan amount that you can get).  I've found that banks in general (outside of conventional mortgages) have been a bit unreliable since COVID; I'm still waiting for them to fully recover.