All Forum Posts by: Stacy Raskin

Some lenders will allow refinancing before a year is up if it's a fix and flip and it's a non qualified mortgage which means it doesn't conform to Fannie or Freddie guidelines as the lender is selling the loan to other investors to replenish cash for more loans. 

For example, the lender will take the purchase price, look at the rehab additions, and the new appraisal and will lend on a percentage of the after rehab value (ARV). So let's say you buy a property for $200K, you invest $50K, new roof, floors etc. The new appraisal comes back at $350K. The lender will lend on a percentage of the $350K. The amount depends on the lender and for some lenders it depends on your experience level, credit, location of property etc. Some will do 65% LTV on the $350K. Some will do more such as 70% or greater.

I know lenders that will do 20% down for a first time investor for a DSCR loan. Some require home ownership, others don't.

What state is your rental property located in?

@Raymond S Clarkston, there are lenders that will do DSCR loans that don't require one year of landlord experience.

@Mike Neville, I work with lenders that will work with investors do fix and flips with any level of investor experience where the middle mortgage credit score as low as 660. The lenders with lend on non-owner occupied single family and multi family up to 4 units. 

The lenders will lend on a 85% of purchase price (so the buyer/borrower comes in with a 15% down payment) and 100% of construction loan amount with maximum after repair value LTV 70%. They offer up to 12 month interest only payments. You're exit plan at that point (or before the 12 months are up) is to sell the property of finance into a longer term loan if it's going to be a rental such a DSCR loan. These lenders also do DSCR loans. I'll send you a message as well.

I work with foreign nationals on different loan programs. 

You could do a bank statement loan. That will look at your deposits. It will be a little higher rate than a conventional loan but could work if you can find a lender who will do a loan for the $72,500. A lot of lenders have minimums of $100K or more.  

 @Bryan Sinkel, I've seen clients do cash out DSCR refinance loans or a HELOCs for down payments.

Have you thought about doing a cash out DSCR refinance on the unit with the tenant in place?

DSCR loans have 30 year fixed mortgage options and the rates are investment property rates. They typically start at about one percent higher than current owner occupied rates if you have strong credit and at least 20% down so 6.8 vs 7.8% for example. They don't use personal income and don't consider your debt to income ratio. They are ideal for investors who are looking to maximize their net worth since they use only your credit score and rents to qualify the loan.

Also, some lenders will use market rents provided by the appraiser so you can buy an unoccupied property and still get a DSCR loan. Also, DSCR loans usually have a minimum loan amount of $100-150K depending on the lenders I work with.

Here's a bit more in detail about how rates are calculated for DSCR loans:
1. Credit score- the higher the best. 760+ generally gets best pricing for investment property loans with most lenders

2. Loan to value ratio: The higher the loan to value ratio (LTV) is, pricing takes a hit. So your pricing will be higher for a 80% LTV loan than for a 60% LTV loan.

3. Are you cash flowing the property? Is your DSCR ratio greater than 1-meaning are you cash flowing. Many lenders will not do a DSCR loan unless cash flowing. If they will do a loan with less than 1, the pricing generally takes a hit. I've included an example below to help illustrate this.

So different lenders have different rates (which do vary even for DSCR loans) but these are factors they all consider.

See example below:

DSCR < 1

Principal + Interest = $1,700

Taxes = $350

Insurance = $100

Association Dues = $50

Total PITIA = $2200

Rent = $2000

DSCR = Rent/PITIA = 2000/2200 = 0.91

Since the DSCR is 0.91, we know the expenses are greater than the income of the property.

DSCR >1

Principal + Interest = $1,500

Taxes = $250Insurance = $100

Association Dues = $25

Total PITIA = $1875

Rent = $2300

DSCR = Rent/PITIA = 2300/1875 = 1.23

Lender terms and fees vary widely. I would recommend working with a mortgage broker as there's often lower rates and fees overall as they work with lenders that either don't work directly with the public or they don't advertise directly to the public. There's lower fees as they have the mortgage broker do a lot of the work who gets paid at the end of the transaction so the lender doesn't have to pay the mortgage broker a salary or benefits which helps lenders keep costs down which translates to lower rates and fees. 

Have you considered DSCR loans?

DSCR loans have 30 year fixed mortgage options and the rates are investment property rates. They typically start at about one percent higher than current owner occupied rates if you have strong credit and at least 20% down so 6.8 vs 7.8% for example. They don't use personal income and don't consider your debt to income ratio. They are ideal for investors who are looking to maximize their net worth since they use only your credit score and rents to qualify the loan.

Also, some lenders will use market rents provided by the appraiser so you can buy an unoccupied property and still get a DSCR loan. You can also often use market rents for cash out refinances. Also, DSCR loans usually have a minimum loan amount of $100-150K depending on the lenders I work with.

Here's a bit more in detail about how rates are calculated for DSCR loans:
1. Credit score- the higher the best. 760+ generally gets best pricing for investment property loans with most lenders

2. Loan to value ratio: The higher the loan to value ratio (LTV) is, pricing takes a hit. So your pricing will be higher for a 80% LTV loan than for a 60% LTV loan.

3. Are you cash flowing the property? Is your DSCR ratio greater than 1-meaning are you cash flowing. Many lenders will not do a DSCR loan unless cash flowing. If they will do a loan with less than 1, the pricing generally takes a hit. I've included an example below to help illustrate this.

So different lenders have different rates (which do vary even for DSCR loans) but these are factors they all consider.

See example below:

DSCR < 1

Principal + Interest = $1,700

Taxes = $350

Insurance = $100

Association Dues = $50

Total PITIA = $2200

Rent = $2000

DSCR = Rent/PITIA = 2000/2200 = 0.91

Since the DSCR is 0.91, we know the expenses are greater than the income of the property.

DSCR >1

Principal + Interest = $1,500

Taxes = $250Insurance = $100

Association Dues = $25

Total PITIA = $1875

Rent = $2300

DSCR = Rent/PITIA = 2300/1875 = 1.23

Lender terms and fees vary widely. I would recommend working with a mortgage broker as it will help you to find more lender options that don't heavily advertise or work directly with the public.