All Forum Posts by: Patrick Roberts

$4300 in origination fees on $283k is 1.5% for a commercial loan - sounds about right, maybe a bit high. 1% is mostly the norm. Also, this depends on the points.

UW/processing/lender fees are typically around $2k per loan (DSCR), give or take. This depends on the lender and what is charged in the orig fee. This includes the two appraisals at $500-$750 each.

Attorney costs are usually $1500-$2500/transaction, including lender's title policy and whether it's a new policy or a true refi. If this is 2 separate loans, then 2x this.

6 months of tax and insurance escrows per property are not really fees. These are costs you're going to pay regardless. My guess is 2 months' worth is to establish reserves, and the rest is prepaids on these. Depends on when your tax and insurance bills are paid. Whether you escrow now or pay out of pocket later, the net costs to you are largely the same. Not much wiggle room here, other than asking to not escrow (this will likely cost you).

Your FICO is below 680, so it wouldnt surprise if you're also buying down the rate with points. I would dig through your docs to see what you're paying in points. Given the Fico on this deal, this is probably the biggest lever you can pull to reduce the total costs.

The Note is the debt (evidence of it, technically). The deed of trust/mortgage is what attaches the debt to the property as security/collateral (secured vs unsecured). Filing/recording the mortgage is what establishes the creditor/lien position and puts your ahead or behind other creditors who may be using the same property as collateral (secured and perfected vs secured but unperfected). You need to find out whether A) a mortgage/DoT was created, and B) whether it was recorded.

Also, its lawyer time, especially if the loan is in default.

Im pretty sure the ATI exemption will only apply if the property was previously assessed at the 6% ratio when the transfer occurred (i.e., when you bought it). My understanding is that you have to submit an application with the county in the same year as the transfer/purchase. The ATI Exemption will be the greater of either A) a reduction of 25% of the new assessed value, or B) the previous assessed value. 

Each county handles this process internally - you'll have to reach out to your county. In CHS, the county assessor has a two page form that you complete and file with the assessor's office, similar to applying for the legal residence exemption. Closing Attorneys/law firms are another good resource for this. 

Check out REI Central, CHS Circle, and the Tri-County Investors Association. All three are monthly REI networking meetups that occur monthly in Charleston. REI Central is probably the largest/most popular - typically 100+ people. There are several smaller satellite events each month as well.

Let me know if I can help. I'm a veteran also and co-host a small monthly networking meetup exclusively for veterans. 

Hi Kala!

Networking is an excellent way to dive in quickly. Charleston has a ton of REI networking events each month. REI Central, CHS Circle, and the Tri-County Investor's Association are a few of them. There are a few one-off's each month as well. REI Central and CHS Circle have dedicated facebook pages as well. The investor community is very active.

Books and podcasts are another good way to self-educate. I'd strongly recommend spending the first few months or more networking and self-educating before you consider paying for any kind of program or mentor/coach. 

Let me know if you need any help with anything in the Lowcountry!

There are a lot of moving parts in a decision like this. My guess is that your current rate is sub 5%, so even with the MI of 0.55%, your current rate is likely still better than most anything you will get on a refi at present. Refi'ing into a 15yr loan is likely to both increase your effective rate and crimp your future buying power by increasing your DTI.

Also, if you really want to use FHA for your next purchase, you'll want to dig into the 100-mile rule to see whether it will impact your situation. The type of loan on your current property is largely irrelevant.

As others have mentioned, you can purchase a MF property as your new primary via Conventional with only 5% down without having to refi your current property. Yes, rates are typically slightly better with FHA, but FHA loans at 3.5% down will also have permanent MI and UFMIP (1.75% of the loan amount).

Generally, SBA loans can only be used directly for real estate purchases if the loan is being used to purchase a facility for a non-real estate investment business that will owner-occupy at least 51% of the property. An example would be a realtor brokerage that buys a mixed-use house in a downtown area, uses the main area for the brokerage office, and subleases/rents any remaining space to other businesses/tenants. Most real estate investment and finance companies are hardbarred industries - only service-based businesses like financial planner firms and RE brokerages are allowed. 

It's highly unlikely that you'll get a DSCR loan without a PG at this point. Business credit is largely irrelevant until you get into the true CRE and commercial lending space, and even then, the key principles are weighted heavily. The vast majority of DSCR loans are structured as regular mortgages with the personal income/DTI replaced by the rental income from the property. It's rare to a get a nonrecourse DSCR mortgage without approx 50% down and a ton of credible operating history. The typical formula is 20-25% down + rental income greater than mortgage payment + good personal credit and PG = DSCR. No two products are the same, but most DSCR mortgages roughly follow this pattern.

As for the cost, DSCR loans will almost always be slightly more expensive than Conventional loans. Typically, you can get a comparable rate on a DSCR by paying for it with some combination of points and fees up front. Some lenders will call them points, some will just have points labeled as fees like orig fees, processing fees, UW fees, etc. This doesnt mean DSCRs are inferior products; theyre great for what theyre meant for, which is relatively cheap, permanent financing for real estate without having to jump through the hoops of a Conventional loan.

Find a non-bank lender or broker who offers bank statements loans - this is literally the situation that these products are meant to tackle. Also, if your rentals are already in service and the banks are using a blanket 75% of gross rents figure, theyre probably incompetent in their underwriting. They should be using a net rental income analysis which would produce an income figure specific to each property based on your reporting on Sched E. This is why I hate on big banks for mortgages - they suck at them. 

Also, I normally try not to call out people or pick fights on social media, but please do not refi your loans into DSCRs thinking this will fix the problem. Almost all DSCRs require a personal guarantee, and PG'ing a loan WILL have the exact same effect on your DTI, regardless of whether the DSCR lender reports it on your personal credit report. Aside from all of the systems that lenders use to find undisclosed debt, one of the questions you'll be asked on the URLA/1003 (the application required for all primary residence mortgages) is basically "Are you responsible for any debt besides what we have already found?" If you lie in answering this question, it's straight-up mortgage fraud, which is exactly what you'd be doing if you answer No to this question while having PG'd a DSCR loan. Only nonrecourse loans will not affect your personal DTI - if you personally guarantee the debt, you're going to take the DTI hit for it unless you can qualify for it to be excluded.

Find a local lender who is skilled in working with self-employed and investor clients and talk through your situation with them. 

Even if the credit card debt was $0, your DTI is way too high to qual for any new traditional/conventional loan until the units are rented.If youre going to keep this duplex, I'd focus on getting one of the units in service as fast as possible.

It sounds like there is currently a decent-size lien ($7300/month) on the property. Finding hard money could be tough unless the ARV is crazy high as you'll be asking them to put $200k in 2nd position or to buy out the first and add $200k to the balance.

Depending on which brokerage you use, you could possibly borrower against your securities holdings with a line of credit (similar to a margin loan) if it's not a retirement account. 30-35% of the balance would likely be within reach, but make sure you FULLY understand margin calls and when they would trigger. This would likely have around the same cost as hard money.

Another thought - assuming you're able to find hard money, what's your exit plan? I hope you have verified that there will be sufficient equity and that you'll be able to qualify (either DSCR or Conv) for a takeout loan or cashout refi for the hard money. If not, I would probably look at selling now or finding an equity partner to bring some cash into the deal to get it across the finish line.