Jumbo Mortgages & DSCR Loans, Multi-Million Dollar Mortgages EXPLAINED

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It's not official yet, but several lenders have already put it out there because we anticipate that they will in November raise the loan limits again. So any loan amount that is that exceeds the threshold that Fannie May and Freddie Mack will buy right. And so these loans are typically portfolio loans because the government is not backing them, so the lender is lending pretty much their own own

money on this one. So the requirements to get qualified for this jumbo mortgage is going to be it's gonna be a lot tougher, especially if you're going full documentation. Full documentation, ladies and gentlemen, is when you're providing your W two's pay stuffs, bank statements, taxi turns. That's a

full documentation loan. So your DEBTA income ratio will have to be, you know, forty three percent all below, and some jumbo lenders want to see forty percent all below, you know, And you can get loan amounts three up to three million, four million, five million, just depending on that lender. So you know, this is when you're trying to buy that that mega mansion, that big old dream

house of yours, you're going to use a jumbo mortgage. Now, if you are self employed and you're looking to buy your mega mansion or your dream home that maybe cost you two million dollars two and a half million dollars, and you don't file your taxes property and you've write

off everything. No't worry. There are loans out there that can help you with out providing all this information, like bank statement loans where we're using the down the deposits that you're receiving in your business bank statements over a twelve month period and the lender will average that out and determine how much income that you're bringing in based off of those deposits, and we can use that to qualify you. This loan is extremely popular amongst entrepreneurs who write,

who take full advantage of the tax code. This is going to come at a much higher interest rate than what a paper full documentation jumbo loan is going to get, but it's well worth it to pay that two percent margin higher two and a half percent margin higher and rate than paying probably a couple hundred thousand taxes. Right.

So again that's when you need to mortgage plan. If you are self employed and you're looking about this luxury home you need to have a mortgage plan in place so you know you can weigh out the pros and cons ahead of time. But there are definitely options out there for all buyers in this jumbo market, whether you're full documentation, whether you're going non traditional and you want to get that luxurious dream home of yours.

to give you a great, a great deal. Right So their rates right now might be in the files for a two million dollars on a thirty ear fix right now because they're letting they're making their own rules so to speak. Right it's their portfolio money. Now, if you are a non traditional buyer, then that rate today might be somewhere around seven and a half to eight percent

on this you know type of paper. If you're doing non traditional finance and like bank statement loans, light doc loans, p and L loans, you know, things of that nature. We're not showing traditional documentation. You're going to pay a premium for it, right, but you're going to get into the house. And that's most important for these self employed

barbers because they can afford that payment. If they're buying at that level, they're not really too concerned about that payment shot, because they'd rather have a payment that's five hundred or one thousand dollars higher, so that way they don't have to pay one hundred thousand, two hundred thousand in taxes, so it balances itself out. So the interest rate is important, but it's not as equally as important and looking at the full spectrum from a holistic point

of view of where you stand. Sure.

the property. Right now, lenders have now started allowing over the past couple of years, investors who want to buy residential real estate use the same formula and calculation to how we underwrite investment commercial properties. We can now use it in the residential investments space as well. Right, So when you're looking to do a true investment property, now, this is when you use your LLC. Okay, we're not looking at your W two's, your taxoo turns, your pay stubs.

We don't want to know where your large deposits came from. All of that stuff is irrelevant. The only thing the lender is really going to do from your personal side is run your credit to make sure your credit is above a six to twenty credit score. Right, and as long as you're above a six twenty credit score, depending on how big the deal is, in most cases, you should be. Okay. Now we're looking at the property itself, and we're looking at dscrs. So the bottom line is

is the property cash flowing? If the property is cash flowing, then the lender will lend on this property. So when you're looking at an investment property, do you need to know how to analyze that property and underwrite it not just as an investor, but also from a funding perspective, because we need to know what you're operating cost sold? What are the expenses of the property? Right? We already know property taxes and assurance, but what other expenses are there?

Do you have to pay for? You know, your utilities. Do you have to pay the light, build the gas, the water, the sewage? Right? What is all these expenses? And then also we're going to look at property management, right, how much is that percentage? Then you have to save for your cap ex expenses, which is your capital expenditures if anything breaks, right, We're going to put all of this into the calculator to see exactly what those expenses

come up, and then also what's the gross income. So at the bottom line is we're looking at to make a long story short and to put this whole the layman's terms, because I want to go nobody's had. We want to make sure that the property is paying for itself and the owners of that LLC are making at least a twenty percent profit after all the expenses. That is a one point too that DSCR ratio that the lender is looking for, and if it does meet this requirement,

then the lender will lend on that property. Right So, lenders, and let's be I'm going to be very clear right now, it is much easier to get approved and get funding for investment properties than it is for your first home.

Much easier. There's not as much paperwork, there's not a lot of hassle with it, as long as you know how to present the numbers to the lender properly and not over exaggerating them to try to make the deal work, because we're going to do our own due diligence and if that deal cash flows, and a cash flows property

is going to close. Now, typically when you're doing a DSc ALL loan, this is going to require at a very minimum, a minimum down payment of twenty percent if it meets the DSR requirement of one point two or percent. If it doesn't meet that requirement, then the lenda will require you to put more money down. So this type of loan is strictly for live men, not for freshmen. If you ain't got the money, say hell.

you have to do it. Now, another thing, I'm going to talk about DSCR because I saw this question come up earlier is about the LLC. The LLC does not have to be established for two years. The LLC does not need business credit. The LLC could be a brand new LLC. You can open up the LLC on Monday and get into a contract on Friday with that brand

new LLC. Okay, let's be very clear. It could be a brand new LLC because lenders know investors will will use multiple different LLCs for each investment property they buy. So you have to understand that that you do not need to established business credit. It doesn't need to be something that's been in the long standard because I get that question all the time, so I just want to throw that out there real quick. What else you said something about refinancing, right shotty, I think that real quick.

repeat right. The DSc loan, the DSCR loan is used to refinance out of your hard money loan, the hard money loan, and again that's different forms and calculations. Some you need to be at sixty five seventy percent max ARV. ARV is your after renovated value. But you know, I would recommend if you can get fifty five sixty percent ARV on your on your hard money deal, it's going to make it easier for you to exit out of

that hard money and go into your refinance. Because when you're doing a refinance on the DSCR loan, your loan to value, your loan to value your LTV drops to seventy percent. In some cases maybe seventy five percent LTV, but most you most of the time I tell my people my mentors use seventy percent ARV because you need to be able to I mean seventy percent as your max period because if you at seventy five, you only have a five and cushion to get out of that

hard money to refinance. So if you start off at fifty five sixty percent ARV on your on your your rehab project, now you have a ten to fifteen percent margin buffer that you can now refinance, maybe pull a little capital out of it too, and now go into your permanent finance and with the DsCl low. So your hard money loan is going to be used to fix buy the property and fix it up. But remember hard money,

the terms are going to be typically twelve months. You can get past twelve months, but then it's going to get more expensive what you're gonna have to pay to keep extending that hard money loan. Right, but again this is strictly for live men, not for freshmen. Flips flop every day, b every single day. So it's very important that you know your numbers, you know exactly what the hell you're doing, because these construction costs can add up quickly fast, in a hurry.

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