All Forum Posts by: Stacy Raskin

@Presley Balestreri, you're able to get a rental property/DSCR loan that will not use your DTI. Those investment property loans are based on the property rents, down payment and your credit score.

Here's a post where I discuss DSCR loans in more detail:

https://www.biggerpockets.com/...

It really depends on what property you're purchasing and how that will affect your DTI and if that limits your investment options. I'll send you a message.

@Samuel Lindgren, great job on the investment! Where are you looking to invest next? Are you considering investment properties that are all rentals or doing house hacking on your next?

@Briana Martin, there are different down payment strategies for future investment properties. Many of my clients decide to pull cash out of their investment property they acquire by doing a fixed rate second mortgage on the investment property if they are looking to access cash and not use down payment options such as savings, etc. 

Once they have the down payment (typically about 25% in today's market), If my clients are looking to buy investment properties and hold them longer term, they will use DSCR loans which are loans that don't use the borrower income and are based on the rental income, the down payment and the borrower credit score.

Here's a post where I answered and went into detail about DSCR loans (my answer is if you scroll down near the bottom):

https://www.biggerpockets.com/...

As long as you are able to get the cash for the down payment for the investment property, you have a minimum credit score and you pick the right properties, it allows you to scale up your investment property portfolio. 

I'll also send you a message. 

@Jake S., a possibility is a hard money loan that you refinance into a DSCR loan if you plan to hold and rent out instead of sell.

@Timothy B Hall, a good option in your case if you have equity that you want to access for a deal and you have a good rate on the first mortgage, is to do a fixed second mortgage. That way you keep your first mortgage rate low, get your cash for the next deal and don't have to worry about a variable rate for a HELOC. I'm doing a deal like that right now. I'll send you a message.

@Ian Fisher, to clarify you are looking to do a first lien at 70-75% at under 5% and then you want to find a lender who will do a second mortgage for the remaining LTV up to 90%? Do you have a property in mind and what state are you in?

@Christen G., A good way to get more cash if a property is paid off is to do a HELOC cash out refi which are going strong and often have better rates compared to HELOCs.

Mortgages are mainly divided between qualified mortgages and non-qualified mortgages. 

Non-QM loans are mortgages that don’t meet the Consumer Financial Protection Bureau’s (CFPB) requirements to be considered qualified mortgages. A qualified mortgage meets the CFPB’s “ability to repay” rule, which requires that lenders vet your finances and set terms on the loan that you’re likely to be able to pay back.

A qualified mortgage is a mortgage that meets certain requirements for lender protection and secondary market trading under the Dodd-Frank Wall Street Reform and Consumer Protection Act. The Dodd-Frank Act is financial reform legislation passed in 2010 in order to protect consumers from the unfair and deceptive practices and products that led to the 2008 crisis.

Qualified mortgages are underwritten to Fannie Mae and Freddie Mac standards. Qualified mortgages must meet certain standards set forth by the Dodd Frank act such as no risky loan features such as balloon payments, debt to income (DTI) can't exceed 43%, no excessive upfront costs and fees and no loan terms longer than 30 years.

Many loans are sold to the government-sponsored enterprises Fannie Mae and Freddie Mac or other aggregators, which can repackage the loans as mortgage-backed securities, or MBS, or hold them on their own books and collect the interest from borrowers.

Non-qualified mortgages are written by lenders who may use part of Fannie Mae and Freddie Mac underwriting standards but they have their own underwriting standards which is why some non-qualified lenders will write loans for self employed people who have less than 2 years of self employment. They don't need to follow Fannie Mae Selling Guidelines or Freddie Mac guidelines as they are not selling to them in the secondary market. These non-qualified mortgage lenders can then sell their loans to investors other than Fannie Mae and Freddie Mac and other GSEs.

A government-sponsored enterprise (GSE) is a quasi-governmental entity established to enhance the flow of credit to specific sectors of the U.S. economy. GSEs do not lend money to the public directly; instead, they guarantee third-party loans and purchase loans in the secondary market, ensuring liquidity. The lenders can sell their loans on the secondary market to the GSEs and other investors and free up more cash to make more loans. 

Non-qualified mortgages give borrowers additional lending options. People who can benefit are self-employed people, business owners, real estate investors and those who don't have the credit or income documentation to qualify for qualified mortgages. Non-qualified mortgages allow for higher levels of debt to income and more flexible documentation of income. They can be a great way for people to build their net worth. 

@Stevenson Alexis, if you are cash flowing and you have zero debt on the property, then the rate sounds high. Really your DSCR rate will be determined by a couple main factors:

1. Credit score- the higher the best. 760+ 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 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 = $250

Insurance = $100

Association Dues = $25

Total PITIA = $1875

Rent = $2300

DSCR = Rent/PITIA = 2300/1875 = 1.23

@Dustin Sanders, what state do you live in? All primary residence loans will require some type of income verification. That doesn't mean you need to have a traditional job. There are loans that use bank statement deposits or if you have a large amount of assets, an asset depletion loan.