Latest / Earn Your Leisure / Jumbo Mortgages & DSCR Loans, Multi-Million Dollar Mortgages EXPLAINED

Transcript

Jumbo Mortgages & DSCR Loans, Multi-Million Dollar Mortgages EXPLAINED · Earn Your Leisure

• 0:01
  Speaker 1: This episode is brought to you by P and C Bank.
• 0:04
  Speaker 1: A lot of people think podcasts about work are boring,
• 0:07
  Speaker 1: and sure they definitely can be, but understanding a professionals
• 0:10
  Speaker 1: routine shows us how they achieve their success little by little,
• 0:14
  Speaker 1: day after day. It's like banking with P and C Bank.
• 0:18
  Speaker 1: It might seem boring to safe plan and make calculated
• 0:21
  Speaker 1: decisions with your bank, but keeping your money boring is
• 0:24
  Speaker 1: what helps you live or more happily fulfilled life. P
• 0:28
  Speaker 1: and C Bank Brilliantly Boring since eighteen sixty five. Brilliantly
• 0:32
  Speaker 1: Boring since eighteen sixty five is a service mark of
• 0:35
  Speaker 1: the PNC Financial Service Group, Inc. P and C Bank
• 0:39
  Speaker 1: National Association Member FDIC Erness What's Up? You ever walk
• 0:45
  Speaker 1: into a small business and everything just works like the
• 0:49
  Speaker 1: checkout is fast, the receipts are digital, tipping is a breeze,
• 0:53
  Speaker 1: and you're out the door before the line even builds.
• 0:55
  Speaker 1: Odds are they're using Square? We love supporting business is
• 1:00
  Speaker 1: that run on Square because it just feels seamless. Whether
• 1:02
  Speaker 1: it's a local coffee shop, a vendor at a pop
• 1:05
  Speaker 1: up market, or even one of our merch partners. Square
• 1:08
  Speaker 1: makes it easy for them to take payments, manage inventory,
• 1:12
  Speaker 1: and run their business with confidence, all from one simple system.
• 1:16
  Speaker 1: If you're a business owner or even just thinking about
• 1:19
  Speaker 1: launching something soon, Square is hands down one of the
• 1:22
  Speaker 1: best tools out there to help you start, run and grow.
• 1:25
  Speaker 1: It's not just about payments, it's about giving you time
• 1:29
  Speaker 1: back so you can focus on what matters most ready.
• 1:32
  Speaker 1: To see how Square can transform your business, visit Square
• 1:35
  Speaker 1: dot com backslash go backslash eyl to learn more that
• 1:40
  Speaker 1: Square dot com backslash, go backslash eyl. Don't wait, don't hesitate.
• 1:45
  Speaker 1: Let's Square handle the back end so you can keep
• 1:48
  Speaker 1: pushing your vision forward.
• 1:51
  Speaker 2: Jumbo mortgages. What's that? I love it? So jumbo mortgages. Right, So,
• 1:59
  Speaker 2: typically when we're looking at jumbo mortgages, these are loan
• 2:04
  Speaker 2: amounts above what Fannie May, Freddie Mac will purchase from
• 2:11
  Speaker 2: a lender. Right so, and loan limits are about to
• 2:17
  Speaker 2: go up anyway, there's a couple of lenders that's already
• 2:21
  Speaker 2: you know, increased the loan limits for twenty twenty five.
• 2:25
  Speaker 2: So you know, a single family in twenty twenty five,
• 2:30
  Speaker 2: Fanny May will go up to eight hundred and two thousand.
• 2:32
  Speaker 2: It's not official yet, but several lenders have already put
• 2:35
  Speaker 2: it out there because we anticipate that they will in
• 2:38
  Speaker 2: November raise the loan limits again. So any loan amount
• 2:42
  Speaker 2: that is that exceeds the threshold that Fannie May and
• 2:47
  Speaker 2: Freddie Mack will buy right. And so these loans are
• 2:51
  Speaker 2: typically portfolio loans because the government is not backing them,
• 2:56
  Speaker 2: so the lender is lending pretty much their own own
• 2:59
  Speaker 2: money on this one. So the requirements to get qualified
• 3:03
  Speaker 2: for this jumbo mortgage is going to be it's gonna
• 3:07
  Speaker 2: be a lot tougher, especially if you're going full documentation.
• 3:10
  Speaker 2: Full documentation, ladies and gentlemen, is when you're providing your
• 3:12
  Speaker 2: W two's pay stuffs, bank statements, taxi turns. That's a
• 3:16
  Speaker 2: full documentation loan. So your DEBTA income ratio will have
• 3:20
  Speaker 2: to be, you know, forty three percent all below, and
• 3:24
  Speaker 2: some jumbo lenders want to see forty percent all below,
• 3:28
  Speaker 2: you know, And you can get loan amounts three up
• 3:31
  Speaker 2: to three million, four million, five million, just depending on
• 3:36
  Speaker 2: that lender. So you know, this is when you're trying
• 3:38
  Speaker 2: to buy that that mega mansion, that big old dream
• 3:41
  Speaker 2: house of yours, you're going to use a jumbo mortgage. Now,
• 3:45
  Speaker 2: if you are self employed and you're looking to buy
• 3:48
  Speaker 2: your mega mansion or your dream home that maybe cost
• 3:50
  Speaker 2: you two million dollars two and a half million dollars,
• 3:53
  Speaker 2: and you don't file your taxes property and you've write
• 3:55
  Speaker 2: off everything. No't worry. There are loans out there that
• 3:59
  Speaker 2: can help you with out providing all this information, like
• 4:02
  Speaker 2: bank statement loans where we're using the down the deposits
• 4:07
  Speaker 2: that you're receiving in your business bank statements over a
• 4:11
  Speaker 2: twelve month period and the lender will average that out
• 4:14
  Speaker 2: and determine how much income that you're bringing in based
• 4:18
  Speaker 2: off of those deposits, and we can use that to
• 4:21
  Speaker 2: qualify you. This loan is extremely popular amongst entrepreneurs who write,
• 4:26
  Speaker 2: who take full advantage of the tax code. This is
• 4:29
  Speaker 2: going to come at a much higher interest rate than
• 4:31
  Speaker 2: what a paper full documentation jumbo loan is going to get,
• 4:38
  Speaker 2: but it's well worth it to pay that two percent
• 4:41
  Speaker 2: margin higher two and a half percent margin higher and
• 4:44
  Speaker 2: rate than paying probably a couple hundred thousand taxes. Right.
• 4:49
  Speaker 2: So again that's when you need to mortgage plan. If
• 4:51
  Speaker 2: you are self employed and you're looking about this luxury
• 4:55
  Speaker 2: home you need to have a mortgage plan in place
• 4:58
  Speaker 2: so you know you can weigh out the pros and
• 5:01
  Speaker 2: cons ahead of time. But there are definitely options out
• 5:04
  Speaker 2: there for all buyers in this jumbo market, whether you're
• 5:09
  Speaker 2: full documentation, whether you're going non traditional and you want
• 5:13
  Speaker 2: to get that luxurious dream home of yours.
• 5:17
  Speaker 3: So just really quick on the jumbo loan, it's usually
• 5:20
  Speaker 3: a higher interest rate prime example, if the interest rates
• 5:23
  Speaker 3: are seven, you could typically see at ten percent.
• 5:26
  Speaker 2: So if you're doing a full documentation loan, and let's
• 5:30
  Speaker 2: just say you're going to like a retail bank like
• 5:32
  Speaker 2: we just mentioned, honestly, the retail banks is going to
• 5:36
  Speaker 2: give you the best deal. Like a mortgage company, a
• 5:39
  Speaker 2: mortgage broker cannot compete with a retail bank like a
• 5:43
  Speaker 2: JP Mulgan because they know you got money. So if
• 5:46
  Speaker 2: you go over there and you bring over two hundred
• 5:48
  Speaker 2: and fifty three hundred thousand, the positive that they're going
• 5:50
  Speaker 2: to give you a great, a great deal. Right So
• 5:54
  Speaker 2: their rates right now might be in the files for
• 5:58
  Speaker 2: a two million dollars on a thirty ear fix right
• 6:02
  Speaker 2: now because they're letting they're making their own rules so
• 6:04
  Speaker 2: to speak. Right it's their portfolio money. Now, if you
• 6:08
  Speaker 2: are a non traditional buyer, then that rate today might
• 6:13
  Speaker 2: be somewhere around seven and a half to eight percent
• 6:17
  Speaker 2: on this you know type of paper. If you're doing
• 6:20
  Speaker 2: non traditional finance and like bank statement loans, light doc loans,
• 6:24
  Speaker 2: p and L loans, you know, things of that nature.
• 6:26
  Speaker 2: We're not showing traditional documentation. You're going to pay a
• 6:30
  Speaker 2: premium for it, right, but you're going to get into
• 6:33
  Speaker 2: the house. And that's most important for these self employed
• 6:37
  Speaker 2: barbers because they can afford that payment. If they're buying
• 6:40
  Speaker 2: at that level, they're not really too concerned about that
• 6:43
  Speaker 2: payment shot, because they'd rather have a payment that's five
• 6:46
  Speaker 2: hundred or one thousand dollars higher, so that way they
• 6:49
  Speaker 2: don't have to pay one hundred thousand, two hundred thousand
• 6:52
  Speaker 2: in taxes, so it balances itself out. So the interest
• 6:57
  Speaker 2: rate is important, but it's not as equally as important
• 7:01
  Speaker 2: and looking at the full spectrum from a holistic point
• 7:04
  Speaker 2: of view of where you stand. Sure.
• 7:07
  Speaker 4: So all right, so let's get into this investing before
• 7:09
  Speaker 4: we leave. So now let's talk about the.
• 7:17
  Speaker 2: Yeah, So the d TR loan, So the ds CR
• 7:20
  Speaker 2: loan stands for debt service coverage ratio, so commercial loans,
• 7:27
  Speaker 2: commercial loans, So all right, let me start off like this.
• 7:31
  Speaker 2: So in residential we have DTI, right, your debt to
• 7:36
  Speaker 2: income ratio. When you're dealing with commercial lending, we have
• 7:40
  Speaker 2: DSCR debt service coverage ratio. That is the DTI of
• 7:46
  Speaker 2: the property. Right now, lenders have now started allowing over
• 7:51
  Speaker 2: the past couple of years, investors who want to buy
• 7:54
  Speaker 2: residential real estate use the same formula and calculation to
• 8:00
  Speaker 2: how we underwrite investment commercial properties. We can now use
• 8:04
  Speaker 2: it in the residential investments space as well. Right, So
• 8:09
  Speaker 2: when you're looking to do a true investment property, now,
• 8:12
  Speaker 2: this is when you use your LLC. Okay, we're not
• 8:15
  Speaker 2: looking at your W two's, your taxoo turns, your pay stubs.
• 8:20
  Speaker 2: We don't want to know where your large deposits came from.
• 8:23
  Speaker 2: All of that stuff is irrelevant. The only thing the
• 8:25
  Speaker 2: lender is really going to do from your personal side
• 8:27
  Speaker 2: is run your credit to make sure your credit is
• 8:29
  Speaker 2: above a six to twenty credit score. Right, and as
• 8:33
  Speaker 2: long as you're above a six twenty credit score, depending
• 8:35
  Speaker 2: on how big the deal is, in most cases, you
• 8:38
  Speaker 2: should be. Okay. Now we're looking at the property itself,
• 8:44
  Speaker 2: and we're looking at dscrs. So the bottom line is
• 8:47
  Speaker 2: is the property cash flowing? If the property is cash flowing,
• 8:53
  Speaker 2: then the lender will lend on this property. So when
• 8:58
  Speaker 2: you're looking at an investment property, do you need to
• 9:00
  Speaker 2: know how to analyze that property and underwrite it not
• 9:04
  Speaker 2: just as an investor, but also from a funding perspective,
• 9:08
  Speaker 2: because we need to know what you're operating cost sold?
• 9:11
  Speaker 2: What are the expenses of the property? Right? We already
• 9:15
  Speaker 2: know property taxes and assurance, but what other expenses are there?
• 9:19
  Speaker 2: Do you have to pay for? You know, your utilities.
• 9:23
  Speaker 2: Do you have to pay the light, build the gas,
• 9:25
  Speaker 2: the water, the sewage? Right? What is all these expenses?
• 9:29
  Speaker 2: And then also we're going to look at property management, right,
• 9:34
  Speaker 2: how much is that percentage? Then you have to save
• 9:36
  Speaker 2: for your cap ex expenses, which is your capital expenditures
• 9:39
  Speaker 2: if anything breaks, right, We're going to put all of
• 9:42
  Speaker 2: this into the calculator to see exactly what those expenses
• 9:46
  Speaker 2: come up, and then also what's the gross income. So
• 9:49
  Speaker 2: at the bottom line is we're looking at to make
• 9:51
  Speaker 2: a long story short and to put this whole the
• 9:53
  Speaker 2: layman's terms, because I want to go nobody's had. We
• 9:56
  Speaker 2: want to make sure that the property is paying for
• 9:59
  Speaker 2: itself and the owners of that LLC are making at
• 10:02
  Speaker 2: least a twenty percent profit after all the expenses. That
• 10:05
  Speaker 2: is a one point too that DSCR ratio that the
• 10:09
  Speaker 2: lender is looking for, and if it does meet this requirement,
• 10:13
  Speaker 2: then the lender will lend on that property. Right So, lenders,
• 10:18
  Speaker 2: and let's be I'm going to be very clear right now,
• 10:21
  Speaker 2: it is much easier to get approved and get funding
• 10:24
  Speaker 2: for investment properties than it is for your first home.
• 10:29
  Speaker 2: Much easier. There's not as much paperwork, there's not a
• 10:33
  Speaker 2: lot of hassle with it, as long as you know
• 10:36
  Speaker 2: how to present the numbers to the lender properly and
• 10:40
  Speaker 2: not over exaggerating them to try to make the deal work,
• 10:44
  Speaker 2: because we're going to do our own due diligence and
• 10:47
  Speaker 2: if that deal cash flows, and a cash flows property
• 10:50
  Speaker 2: is going to close. Now, typically when you're doing a
• 10:52
  Speaker 2: DSc ALL loan, this is going to require at a
• 10:55
  Speaker 2: very minimum, a minimum down payment of twenty percent if
• 11:00
  Speaker 2: it meets the DSR requirement of one point two or percent.
• 11:04
  Speaker 2: If it doesn't meet that requirement, then the lenda will
• 11:07
  Speaker 2: require you to put more money down. So this type
• 11:10
  Speaker 2: of loan is strictly for live men, not for freshmen.
• 11:15
  Speaker 2: If you ain't got the money, say hell.
• 11:17
  Speaker 4: No, they're gonna want their money rain sleep hell So
• 11:22
  Speaker 4: that's a no rest in peace all these rules.
• 11:25
  Speaker 2: Man, it's a biggie okay, refinancing.
• 11:28
  Speaker 4: Want to talk about that, yeah.
• 11:31
  Speaker 2: I mean we could, we could talk. We could talk
• 11:33
  Speaker 2: about that, or we can. We want to take some
• 11:35
  Speaker 2: questions about this cause I saw a thousand and one questions.
• 11:38
  Speaker 3: Yeah, I mean you saw some if you want, yeah,
• 11:41
  Speaker 3: go ahead, man, all right, questions please.
• 11:45
  Speaker 2: So already and so somebody asks, Rashida says, the minimum
• 11:49
  Speaker 2: down payment of twenty percent. Yes, it's twenty percent, And
• 11:52
  Speaker 2: I want to be clear again on that, only if
• 11:55
  Speaker 2: it meets the one point two DSR requirement. So just
• 12:01
  Speaker 2: because the minimum down payment is there, it doesn't mean
• 12:06
  Speaker 2: that that property will cash flow out of it, right,
• 12:11
  Speaker 2: So you might have to put twenty five percent, you
• 12:13
  Speaker 2: might have to put thirty percent. Whatever it takes to
• 12:16
  Speaker 2: get that property to DNCR and the cash flow then
• 12:20
  Speaker 2: you have to do it. Now, another thing, I'm going
• 12:22
  Speaker 2: to talk about DSCR because I saw this question come
• 12:24
  Speaker 2: up earlier is about the LLC. The LLC does not
• 12:28
  Speaker 2: have to be established for two years. The LLC does
• 12:30
  Speaker 2: not need business credit. The LLC could be a brand
• 12:33
  Speaker 2: new LLC. You can open up the LLC on Monday
• 12:37
  Speaker 2: and get into a contract on Friday with that brand
• 12:41
  Speaker 2: new LLC. Okay, let's be very clear. It could be
• 12:45
  Speaker 2: a brand new LLC because lenders know investors will will
• 12:50
  Speaker 2: use multiple different LLCs for each investment property they buy.
• 12:57
  Speaker 2: So you have to understand that that you do not
• 13:00
  Speaker 2: need to established business credit. It doesn't need to be
• 13:03
  Speaker 2: something that's been in the long standard because I get
• 13:05
  Speaker 2: that question all the time, so I just want to
• 13:07
  Speaker 2: throw that out there real quick. What else you said
• 13:13
  Speaker 2: something about refinancing, right shotty, I think that real quick.
• 13:17
  Speaker 3: Before we go to refinance. Somebody was asking, is there
• 13:21
  Speaker 3: a difference between this and a hard money loan? Because
• 13:24
  Speaker 3: it sounds like the similarities.
• 13:26
  Speaker 2: Can we draw a similar difference. It's it's a big difference.
• 13:31
  Speaker 2: It's it's nothing. It's separated apart from hard money. Right,
• 13:35
  Speaker 2: hard money is one thing. Ds CR is one thing. Right.
• 13:39
  Speaker 2: DNCR loans doesn't have rehab money attached to it. The
• 13:43
  Speaker 2: ds CR loan is for rental stable rental properties. It's
• 13:48
  Speaker 2: not for rehabbing. When you want to buy a rehab
• 13:52
  Speaker 2: and you do your bird strategy right, buy, renovate, refinance, rent,
• 13:59
  Speaker 2: repeat right. The DSc loan, the DSCR loan is used
• 14:03
  Speaker 2: to refinance out of your hard money loan, the hard
• 14:06
  Speaker 2: money loan, and again that's different forms and calculations. Some
• 14:11
  Speaker 2: you need to be at sixty five seventy percent max ARV.
• 14:15
  Speaker 2: ARV is your after renovated value. But you know, I
• 14:18
  Speaker 2: would recommend if you can get fifty five sixty percent
• 14:21
  Speaker 2: ARV on your on your hard money deal, it's going
• 14:24
  Speaker 2: to make it easier for you to exit out of
• 14:26
  Speaker 2: that hard money and go into your refinance. Because when
• 14:30
  Speaker 2: you're doing a refinance on the DSCR loan, your loan
• 14:33
  Speaker 2: to value, your loan to value your LTV drops to
• 14:38
  Speaker 2: seventy percent. In some cases maybe seventy five percent LTV,
• 14:43
  Speaker 2: but most you most of the time I tell my
• 14:46
  Speaker 2: people my mentors use seventy percent ARV because you need
• 14:52
  Speaker 2: to be able to I mean seventy percent as your
• 14:55
  Speaker 2: max period because if you at seventy five, you only
• 14:59
  Speaker 2: have a five and cushion to get out of that
• 15:01
  Speaker 2: hard money to refinance. So if you start off at
• 15:03
  Speaker 2: fifty five sixty percent ARV on your on your your
• 15:07
  Speaker 2: rehab project, now you have a ten to fifteen percent
• 15:11
  Speaker 2: margin buffer that you can now refinance, maybe pull a
• 15:14
  Speaker 2: little capital out of it too, and now go into
• 15:17
  Speaker 2: your permanent finance and with the DsCl low. So your
• 15:20
  Speaker 2: hard money loan is going to be used to fix
• 15:22
  Speaker 2: buy the property and fix it up. But remember hard money,
• 15:25
  Speaker 2: the terms are going to be typically twelve months. You
• 15:28
  Speaker 2: can get past twelve months, but then it's going to
• 15:31
  Speaker 2: get more expensive what you're gonna have to pay to
• 15:33
  Speaker 2: keep extending that hard money loan. Right, but again this
• 15:37
  Speaker 2: is strictly for live men, not for freshmen. Flips flop
• 15:41
  Speaker 2: every day, b every single day. So it's very important
• 15:45
  Speaker 2: that you know your numbers, you know exactly what the
• 15:48
  Speaker 2: hell you're doing, because these construction costs can add up
• 15:53
  Speaker 2: quickly fast, in a hurry.
• 15:57
  Speaker 4: Like flop flips flop every day you live.
• 16:02
  Speaker 2: Every day day.
• 16:05
  Speaker 1: You said, like, it's definitely look uppable.
• 16:09
  Speaker 2: Everything is figure outable.
• 16:11
  Speaker 5: Figure outable, that's what it was. An illegal alien from
• 16:15
  Speaker 5: Guatemala charged with raping a child in Massachusetts, an MS
• 16:19
  Speaker 5: thirteen gang member from Al Salvador accused of murdering a
• 16:23
  Speaker 5: Texas man of Venezuelan charged with filming and selling child
• 16:27
  Speaker 5: pornography in Michigan. These are just some of the heinous
• 16:31
  Speaker 5: migrant criminals caught because of President Donald J. Trump's leadership.
• 16:35
  Speaker 5: I'm Christy Noman, the United States Secretary of Homeland Security.
• 16:39
  Speaker 5: Under President Trump, attempted illegal border crossings are at the
• 16:43
  Speaker 5: lowest levels ever recorded, and over one hundred thousand illegal
• 16:47
  Speaker 5: aliens have been arrested. If you are here illegally, your
• 16:51
  Speaker 5: next you will be fine nearly one thousand dollars a day, imprisoned,
• 16:55
  Speaker 5: and deported. You will never return. But if you register
• 16:59
  Speaker 5: using our CBP home app and leave now, you could
• 17:02
  Speaker 5: be allowed to return legally. Do what's right. Leave now.
• 17:07
  Speaker 5: Under President Trump, America's laws, border and families will be protected.
• 17:12
  Speaker 2: Sponsored by the United States Department of Homeland Security,