All Forum Posts by: Nate Herndon

Hi Cody - I utilize programs for my clients with sub-$100k properties all the time.

The minimum value is $75k (though I have dipped under that by exception), with minimum loan amounts of $50k. Would be happy to connect and get a loan summary over to you today. This program is also winning on our weekly interest rate survey at the moment.

Here is an example of a loan summary put together for a client last week.

Those are definitely some unique loan options. Max LTC on any of our term loan programs will be 80%, and for an STR, it will underwrite to 80% of AirDNA for your market rents.

With strong credit, the rate on an 80% LTC short-term rental purchase would be right around 8.00% at the moment. The rates will move with the 2-year treasury on that specific program.

o Commercial loan, sort of - they are 30-year fixed DSCR loans with private national lenders.

o We close in an entity/LLC 99% of the time - very rarely do we receive a request to close in someone's personal name. Though we can do that, LLC is preferred by most of my clients.

o Individual credit will be used for determining max leverage (80% LTC is highest available) and interest rate.

o Personal income, taxes, and debt-to-income ratio will not be utilized. Debt Service Coverage Ratio loans (DSCR) utilize the potential property income for qualification, not your own.

Sounds like a plan. That Windsor property appraisal used sales comps from 5.1, 6.3, and 12.3 miles away. Nature of the beast with a more rural property - but still doable.

Hi @Benjamin Giles, happy to answer this as best I can from the DSCR lending partner perspective. This is based on a few dozen private lender programs that I utilize for my clients.

o Rate buydown ratio: Current norm is a 4:1 ratio, or 1% fee for 0.25% off of rate. A 3:1 ratio or 1% fee for 0.375% might be available. The rate that you buy down to is your rate for the entirety of your 30-year fixed loan - it is not a stepdown like you might see on some conventional loan products. Some programs will let you spend as much as you like to buy the rate down (to their rate floor), while others do have a cap of 3-5% max buydown like you mentioned.

o Seller concessions: The typical max allowed seller concession on a DSCR loan is going to be 2-3% of the loan amount. The rate buydown is simply a part of your closing costs, so if you work a 2% seller concession into your contract and want to consider that the 'seller-paid buydown' then that's up to you.

o Rate floor: You are going to eventually hit a rate floor with any loan program, or a point where you cannot buy the rate down any further. That varies from lender to lender. One of my favorite programs offers a rate floor down to 7.50% right now, but their par rates are more competitive (i.e. without a buydown). Another lender offers rates down to 5.75%, but they are more costly to get there.

Hi @Ronald L. Covington II, I think that short-term rental and furnished mid-term rental can be viable options if marketed correctly. I have quite a few clients who have found success with both. 

One client in Indianapolis rents a small, furnished single-family for 3-month terms to traveling nurses. His long-term market rents appraised for $950, whereas he was pulling $2,000+/month as a mid-term rental.

Jeff - the seller will only know what you tell them. If you haven't provided prequal letters from B and C, you will not have to provide denial letters from those lenders as well. The only way a seller would have that information is if you physically provide it.

If you have only disclosed prequalification through Lender A, you would only need to provide a denial letter from that lender.

@MJ Richlands

I have a program that can assist with rural-appraised long-term rentals at 65% LTV - we just closed a deal in Windsor, NC that struggled with comps, but we were able to get it done. That program only requires a $75k minimum property value and a $50k minimum loan amount.

Here is an example of what that would look like.

Hi Mike, how small are you talking? Are these current rental properties?

One of my favorite programs can finance property values down to $75,000 - however, I've had exceptions granted for clients with lower values as long as the loan amount stays above $50,000.

Hi @Robin Hopkins, I utilize three distinct loan programs that each have different ways that they can win on refinances - but they all have a 90-day seasoning requirement instead of 6 months. Sounds like that would be helpful in this scenario.

I utilize these with many clients who are turning properties pretty quickly. We generally start around day 60 of ownership and close just after day 90. Will send you a quick DM to get connected.