June 18, 2024 • 22 mins
Welcome to "Loan Officer Training," the podcast dedicated to helping professionals excel in the mortgage and lending industry. In this episode, titled "How to Structure a 5-10 Unit Property Loan," we provide an in-depth look at the intricacies of financing multi-unit properties.
Discover key strategies for structuring loans on 5-10 unit buildings, from understanding loan types and interest rates to navigating down payment requirements and necessary documentation. Our expert hosts will share their insights and tips to help you effectively support your clients and close more deals.
Whether you're a new loan officer or looking to enhance your expertise, this episode is packed with valuable information to elevate your career. Tune in and learn how to master the art of multi-unit property financing!
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The Mortgage Calculator is a licensed Mortgage Lender (NMLS #2377459) that specializes in using technology to enable borrowers to access Conventional, FHA, VA, and USDA Programs, as well as over 5,000 Non-QM mortgage loan programs using alternative income documentation!
Using The Mortgage Calculator proprietary technology, borrowers can instantly price and quote thousands of mortgage loan programs in just a few clicks. The Mortgage Calculator technology also enables borrowers to instantly complete a full loan application and upload documents to our AI powered software to get qualified in just minutes!
Our team of over 350 licensed Mortgage Loan Originators can assist our customers with Conventional, FHA, VA and USDA mortgages as well as access thousands of mortgage programs using Alternative Income Documentation such as Bank Statement Mortgages, P&L Mortgages, Asset Based Mortgage Programs, No Ratio CDFI Loan Programs, DSCR Investor Mortgages, Commercial Mortgages, Fix and Fl
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The Mortgage Calculator is a licensed Mortgage Lender (NMLS #2377459) that specializes in using technology to enable borrowers to access Conventional, FHA, VA, and USDA Programs, as well as thousands of Non-QM mortgage loan program variations using alternative income documentation!
Using The Mortgage Calculator proprietary technology, borrowers can instantly price and quote thousands of mortgage loan programs in just a few clicks. The Mortgage Calculator technology also enables borrowers to instantly complete a full loan application and upload documents to our AI powered software to get qualified in just minutes!
Our team of licensed Mortgage Loan Originators can assist our customers with Conventional, FHA, VA and USD
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Restream recording Jun 18, (00:00):
So, welcome everyone.
(00:00):
My name is Kyle Hiersche.
I'm the COO of the MortgageCalculator joined here by our
President Nick Hiersche and ourSales Manager Jose Gonzalez.
We are a lender that specializesin non QM loans and what we do
every Tuesday, Wednesday, andThursday evening at 7 p.
m.
Eastern is a deep dive into adifferent loan officer training
topic.
And tonight's topic is going tobe how to structure a loan.
(00:20):
A five to 10 unit property.
Now, again, we do specialize innon QM here at the mortgage
calculator and working withinvestors.
So it's something we're veryfamiliar with and that we get a
lot of requests for.
So Jose, let's go ahead and getinto it and talk about how to
structure five to 10 unitproperty loan.
Good evening, everybody.
(00:41):
Thank you for joining us fortonight's training on how to
structure a five to 10 unit.
Property loan.
Those are considered small multifamily properties.
Now, if I were a loan officer,just starting out in the
business and looking for acouple of niches, this is
definitely one of the nichesthat I would look to work
(01:04):
because you're going to havevery little competition.
There just aren't really a lotof MLOs out there willing to
venture into the unknown or outof their comfort zone to
originate five to 10 unitproperties.
small multifamily loans.
However, at the mortgagecalculator, we have a couple of
(01:24):
interesting twists to this typeof property, which I'm going to
bring up in our presentation,which is why I absolutely love
this product because this iscommercial type product, but we
have our additional options andI'm not, I'm going to get right
into it right here.
So I don't spill the beansbefore we get to it.
(01:49):
So 5 to 10 units, smallmultifamily defined, what are we
talking about commonmisconception here when we look
when we're saying 5 to 10 units,uh, some of those new to the
business may think that we'retalking about.
Five to ten individualproperties, right?
(02:10):
Which would be units in thatway.
But what we're really talkingabout is units within one
building or one property folionumber.
I guess that's the best way toput it because we could have,
for example, we could have afive unit property with five
single family homes on an acrelot.
Everybody has their little pieceof land there to separate
(02:33):
themselves, but it's all onefolio number with the five
properties sitting on, on, onthere.
And even though there may befencing separating one space
from the other, it's all one biglot, right?
One folio number with fivestructures on it, or it could be
(02:53):
one building.
With five units, five individualunits inside the building, five
family units, let's call it thatway, right?
One unit per family.
So units, like I just mentioned,can be attached or detached.
They are not individualproperties with separate folio
numbers.
So if you're looking at, atsomething there and you see
(03:16):
individual folio numbers,Floating number is attached to
the land.
That means you have more thanone piece of land.
That means that you havemultiple properties, not
multiple units.
And now this program that we'retalking about is for residential
units only.
We do have our mixed.
use, option, which is not theone we're going over today, but
(03:38):
which is the sister option ofthis one.
But today's, presentation dealswith residential units only.
Now, here's what I wasmentioning about, we have
different twists to the optionshere because at the mortgage
calculator, not only do we havethe regular Commercial option,
right?
What everybody's used to,reaching out to for these five
(04:02):
to 10 unit multifamily loans,the thing about the full
commercial option is that it,they will not originate the
loan.
If the population density fallsbelow a third, a certain
threshold, what that may mean,what, what that amount is, is
really going to depend on theirindividual guidelines, but
(04:24):
they're looking at, how manypeople per square mile, right?
They don't really like it to bea low number and they do have
their amounts and those do varyfrom outlet to outlet.
However, in our DSCR hybrid.
Option where we combine a lot ofthe features of a 1 to 4 unit
(04:45):
residential DSCR loan into this5 to 10 unit, DSCR loan to
simplify the matter, not worryabout population density, simply
worry about.
Is it going to be designated asa rural property?
R U R A L.
(05:05):
Rural.
That's like a tongue twister.
So our DSCR hybrid option,again, doesn't look at zip
codes, doesn't look, doesn'tlook at population density.
No issues there.
So why is the DSCR loan programgood?
(05:27):
I mean, why do we love that ThatDSCR hybrid option and we're
mainly talking about theflexibility that the guidelines
offer the investor to be able toget in on the property.
We already mentioned one, right?
We don't have to worry aboutpopulation density.
So, you know, that some of thebetter deals come up in those
(05:48):
lower population density areaswhere they're still getting
good, rate of return on theirrent, they just have less people
there.
It may not be a rural in natureproperty.
So, you know, why not be able todo the loan just because of a
simple population densitynumber?
So that's why we love it here.
(06:09):
And that's why I definitelywould recommend this program.
As as one of your tools to beable to offer.
Now, there have been somechanges because in this program
since, the last presentation,because there have there.
The market is evolving, right?
We mentioned this all the time.
How non Q.
M's liquidity is increasing in.
(06:32):
And when the liquidityincreases, that means there's
more players in the secondarymarket looking To buy this type
of product, right?
So greater liquidity is going tousually mean more relaxed
guidelines, right?
They're trying to open up themarket to get more business.
(06:53):
So not only are they going, youknow, they're basically going to
give us favorable options.
So not, not only may they, youknow, mess with the LTVs, but
they also are going to tweak.
items like the DSCR.
Previously, we needed a minimum1.
1 DSCR to be able to do thisoption, but now due to all the
(07:13):
different options that we have,we can go as low as 1.
0 DSCR.
Up to 3 million.
Now, please know that there aresome differences in this program
when compared to our usual DSCR.
I mean, you're not going to geteverything you want, right?
They got to put some amount ofrestrictions.
(07:36):
So, purchases will use the lowerof the current rent.
If the property is occupied, youknow, like they go into the
property and they ask thetenant, how much rent do you
pay?
Tenant says 1800.
That's what they're going to puton the appraisal that the tenant
is paying unless a lease hasbeen provided.
Sometimes there is no lease.
(07:57):
So it's got purchases.
We'll use the lower of thecurrent rent.
or the market rent on theappraisal 1007.
Refinances will use the lower ofthe lease or the market rent on
the appraisal 1007.
Now notice how this programtreats vacancies.
(08:19):
Vacant units get anywhere from a10 to 25 reduction.
And, rent off of the marketrent.
Obviously if it's vacant, it'snot rented.
So we go with, with the marketrent and that's going to depend
on how many units are vacant onthe reduction that they're going
to give unless the property isbeing used as a short term
(08:41):
rental.
Please note there's a maximum 35percent vacancy allowed on a
refinance, again, unless theproperty is being used as a
short term rental.
Now, keep in mind also thefollowing, we have multiple
options for this program, morethan one.
So, these guidelines are acombination, and whenever I can,
(09:04):
I'll, I'll state that this isone over the other.
But just know that this is allis, is good because it It shows
the flexibility that we have.
In being able to place theborrower in different options
for this 5 to 10 unit smallmultifamily loan option.
One of the great, one of thegreat new features now, again,
(09:26):
1.
0 DSER up to 3 million, that's anew feature.
The ability to use short termrental income.
To, you know, to calculate theDSCR and qualify the borrower is
another new feature for these 5to 10 unit small multifamily
properties.
Previously, they were long termrent only, and on the short term
(09:47):
rental, just like in some of ourDS, our regular 1 to 4 unit DSCR
options, we're able to use shortterm rental revenue reports.
We're able to use AirDNA onpurchases and refinances when
the property has recently beenput into service because it was
just remodeled.
And we're also able to use bankstatements evidencing the short
(10:09):
term rental deposits.
So those are pretty interestingfeatures on short term rental
that were not possible before.
I'd say seven months back, six,seven months back that this was
not available, but it is now.
So what are our eligibleborrowers investing?
(10:32):
Well, you see right there, I'mgoing to jump right to the bold
red.
Foreign nationals.
We do have options now on the 5to 10 unit DSCR for our foreign
national borrowers.
The same option that allows usto use short term rental income
also allows us to use to offerthis to foreign national
(10:55):
borrowers, which Until recentlywas not possible.
Please note in thatinexperienced investors only
with either if they don't own aproperty, if they, if they don't
have at least one year'sownership, they should have at
least one year's smallmultifamily management
experience.
No experience for first timehome buyers are considered on an
(11:17):
exception basis.
It's going to depend on themerits of the file, right?
Compensating factors.
So US citizens, permanentresidents, non permanent
residents.
And four nationals are possible.
Vesting and individuals ispossible.
Prefer, in a us based entitylike an LLC or a corporation,
(11:40):
please know that one end you,you cannot have layered entity
ownership.
Right.
That's a definite complicationthat can happen.
If you do, then that's anotherturn it in for an exception, and
see if they'll take it.
But what you definitely cannothave is any foreign based
(12:01):
entities owning any property norany foreign based entity owning
the other entity.
That'll definitely disqualifythem.
And please note that IRAs, blindtrusts, land trusts, and most
inter vivos revocable trusts arenot acceptable forms of vesting.
(12:24):
So when in doubt, grab all ofyour entity documents.
Turn them in for, for a previewby underwriting and they'll
confirm for you if they areacceptable or so, what are our
credit and asset requirements?
(12:47):
Well, again, here, remember,drawing from multiple options,
trying to highlight.
The strengths here, how flexiblewe are in our commercial option.
We can go as low as 650.
You heard me correct.
650 in our DSCR hybrid option.
(13:09):
We can go as low as 660.
Now for maximum LTV, our hybridDSCR option is maxed at 75
percent for a purchase.
And 70 percent for an LTV for acashout.
Now, keep in mind, obviously,our hybrid DSCR option is going
(13:30):
to be a little bit more relaxedthan the commercial option,
except for the LTV, right?
And the credit score being alittle bit lower.
But the fact of the no zip codesituation that we don't have to
take into consideration, that'sa big one.
Which adds some additional riskto the system.
To the file, hence the lowerloan to value of 75 on the
(13:52):
purchase and 70 percent on thecash out for the hybrid and for
a commercial option purchase, wecan go 80% LTV and cash out 75%.
And now a very interesting pointhere to note with our commercial
option, 90 percent combined loanto value is possible with a 75
(14:16):
percent LTV first and a 15percent LTV seller second.
That means First mortgage fromus, 15 percent second mortgage
from the seller.
Seller's going to have to holdthat paper gifts with a minimum
5 percent borrower contributionare possible.
(14:38):
So far now the gift cannot beused to meet the reserve
requirement.
So if your down payment is 25%,you gotta have, you can have a
20 percent gift.
And 5 percent down payment fromthe borrower and the bar also
have has to have assets that canbe verified to meet the reserve
requirements.
(14:59):
And what are the reserverequirements you may ask?
Well, they vary again betweenoption to option.
So I'm going to give you thetypical reserve requirements.
And from there, you'd have to gointo the specific guidelines for
the option you're looking at tosee how they vary.
So you're looking at up to amillion dollar loan amount,
three months reserves required,six months PITI.
(15:23):
Now we're talking six months ofPITI, three months of PITI.
So six months PITI for amillion, one to 2 million loan,
nine months PITI reserve forloans over 2 million and three
months for each additionalproperty.
And this is max 18 months intotal reserves you could ever be
(15:45):
asked.
So those are the reserves thatwe're talking about that cannot
be met with a gift.
So what are our minimum propertyrequirements?
Well, minimum propertyrequirements, you're looking at
minimum size of 400 square footper unit, right?
(16:10):
So that's not that big.
Now here's a really importantnote.
Each unit has to have a fullkitchen and bathroom full
kitchen, meaning a range to cookwith.
I mean, if it doesn't have anoven, you could probably get
away with that.
If it has a built in cooktop ofsome type that's permanently
installed, you could probablyget away with that.
(16:31):
Could have a, you know, atabletop type oven, but you do
need to have, you know, fullkitchen and a full bathroom.
Now here's one that can, Thatcan come back at you without,
you know, what's happening onthe appraisal.
The property use has torepresent the highest and best
(16:52):
use for the property.
Now that should usually not bean issue for a multifamily
property.
Being a multifamily property.
Can't usually use it for toomany other things.
But, you know, maybe an issue ifit's surrounded by commercial
properties and is the onlyresidential property on the
street and the appraiser feelsthat the highest and best use
would be to convert the propertyinto a retail shop and rent it
(17:14):
for more money per square footthan residential, that can
happen.
Now, the property cannot berural, right?
That means that the appraisercannot have stamped on it rural.
However.
You are able, to have a propertywith anywhere from two to 20
(17:36):
acres, right?
So that's, if you have 20 acres,you may be rural, but just know
you are not, it is notautomatically gonna disqualify
you if you have a big acreageproperty, I guess is the point
I'm trying to make here.
Minimum C four or Q4 condition.
In other words, if it's C fiveor Q five.
(17:59):
It's a no go.
Minimum 12 months cash outseasoning for market value.
That's a little bit differentthan a regular DSCR.
The property cannot have anyenvironmental issues, no
excessive nor structuraldeferred maintenance.
(18:22):
And here's another, a realinteresting point.
Any unleased units.
Must be in lease readycondition.
So that can catch you bysurprise.
If you think they're going touse the market rent over the,
lease rent, that's, they will dothat, but the unit cannot be in
(18:45):
a position where it needsrenovation.
It's just, it can be vacant, butnot needing a whole bunch of
stuff.
So you can see how in your, fiveto 10 unit multifamily is a
little bit different.
Then, you know, once you goabove, you know, 11 to 20 to 30
to 40 units.
(19:05):
So this is a really good sectorof the market, which is, I
believe to be a little bitunderserved, depending what part
of the country you're in, youcould have a lot of these types
of properties.
These types of properties tendedto be developed, you know, not
new, phenomenon, right.
The small multifamilies.
So depending on what part of thecountry you're in, I mean, if
(19:27):
you're in the suburbs somewhereand everything is from 1990 and
2000, you probably won't havetoo many of these properties,
but if it's an older developedarea.
You probably will have manyopportunities to finance 5 to 10
unit multifamily properties.
So here at the mortgagecalculator, our loan officers
(19:47):
are, loan consultants and candefinitely be there for you to
help structure your smallmultifamily properties, either
as a DSCR.
Or as a commercial, right?
But typically most of ourborrowers are going to like that
pure DSCR option because some ofthe commercial options may go
(20:08):
DSCR on the property rent.
But then have some type of apersonal financial statement
that needs to be provided by theborrower to make sure that
they're able to cover their ownpersonal expenses.
So looking forward to helpingyou all structure your small
multifamily loans here at themortgage calculator.
(20:34):
All right.
Thank you, Jose.
Okay.
I don't see any questions here.
I see one question, but I thinkit was already basically
answered.
Oh, here comes a question.
Okay, let's put it on the screenhere.
Jose, do we currently have nonDell options for this or
brokered options?
Yes, we have, we have, all theoptions that I mentioned to you
(20:57):
that I, shown here today werenon Dell.
The commercial option.
Is a, brokered option as our,our commercial options.
We don't fund the commercialloans, but we certainly fund all
of the DSCR loans up to theeight unit, I believe we can
fund those in house.
(21:20):
All right.
I don't see any other questions,so I think we can go ahead and
wrap it up.
Now, tomorrow is actually aholiday, so we normally do this
Tuesdays, Wednesdays, andThursdays at 7 p.
m.
Eastern, but this week we willjust be doing it Tuesday and
Thursday, so we appreciateeverybody tuning in, and we will
see you on Thursday at 7 p.
m.
Eastern for the next episode ofthe Loan Officer Training Series
(21:43):
with the Mortgage Calculator.
Have a great night, everybody.
So, welcome everyone.
(00:00):
My name is Kyle Hiersche.
I'm the COO of the MortgageCalculator joined here by our
President Nick Hiersche and ourSales Manager Jose Gonzalez.
We are a lender that specializesin non QM loans and what we do
every Tuesday, Wednesday, andThursday evening at 7 p.
m.
Eastern is a deep dive into adifferent loan officer training
topic.
And tonight's topic is going tobe how to structure a loan.
(00:20):
A five to 10 unit property.
Now, again, we do specialize innon QM here at the mortgage
calculator and working withinvestors.
So it's something we're veryfamiliar with and that we get a
lot of requests for.
So Jose, let's go ahead and getinto it and talk about how to
structure five to 10 unitproperty loan.
Good evening, everybody.
(00:41):
Thank you for joining us fortonight's training on how to
structure a five to 10 unit.
Property loan.
Those are considered small multifamily properties.
Now, if I were a loan officer,just starting out in the
business and looking for acouple of niches, this is
definitely one of the nichesthat I would look to work
(01:04):
because you're going to havevery little competition.
There just aren't really a lotof MLOs out there willing to
venture into the unknown or outof their comfort zone to
originate five to 10 unitproperties.
small multifamily loans.
However, at the mortgagecalculator, we have a couple of
(01:24):
interesting twists to this typeof property, which I'm going to
bring up in our presentation,which is why I absolutely love
this product because this iscommercial type product, but we
have our additional options andI'm not, I'm going to get right
into it right here.
So I don't spill the beansbefore we get to it.
(01:49):
So 5 to 10 units, smallmultifamily defined, what are we
talking about commonmisconception here when we look
when we're saying 5 to 10 units,uh, some of those new to the
business may think that we'retalking about.
Five to ten individualproperties, right?
(02:10):
Which would be units in thatway.
But what we're really talkingabout is units within one
building or one property folionumber.
I guess that's the best way toput it because we could have,
for example, we could have afive unit property with five
single family homes on an acrelot.
Everybody has their little pieceof land there to separate
(02:33):
themselves, but it's all onefolio number with the five
properties sitting on, on, onthere.
And even though there may befencing separating one space
from the other, it's all one biglot, right?
One folio number with fivestructures on it, or it could be
(02:53):
one building.
With five units, five individualunits inside the building, five
family units, let's call it thatway, right?
One unit per family.
So units, like I just mentioned,can be attached or detached.
They are not individualproperties with separate folio
numbers.
So if you're looking at, atsomething there and you see
(03:16):
individual folio numbers,Floating number is attached to
the land.
That means you have more thanone piece of land.
That means that you havemultiple properties, not
multiple units.
And now this program that we'retalking about is for residential
units only.
We do have our mixed.
use, option, which is not theone we're going over today, but
(03:38):
which is the sister option ofthis one.
But today's, presentation dealswith residential units only.
Now, here's what I wasmentioning about, we have
different twists to the optionshere because at the mortgage
calculator, not only do we havethe regular Commercial option,
right?
What everybody's used to,reaching out to for these five
(04:02):
to 10 unit multifamily loans,the thing about the full
commercial option is that it,they will not originate the
loan.
If the population density fallsbelow a third, a certain
threshold, what that may mean,what, what that amount is, is
really going to depend on theirindividual guidelines, but
(04:24):
they're looking at, how manypeople per square mile, right?
They don't really like it to bea low number and they do have
their amounts and those do varyfrom outlet to outlet.
However, in our DSCR hybrid.
Option where we combine a lot ofthe features of a 1 to 4 unit
(04:45):
residential DSCR loan into this5 to 10 unit, DSCR loan to
simplify the matter, not worryabout population density, simply
worry about.
Is it going to be designated asa rural property?
R U R A L.
(05:05):
Rural.
That's like a tongue twister.
So our DSCR hybrid option,again, doesn't look at zip
codes, doesn't look, doesn'tlook at population density.
No issues there.
So why is the DSCR loan programgood?
(05:27):
I mean, why do we love that ThatDSCR hybrid option and we're
mainly talking about theflexibility that the guidelines
offer the investor to be able toget in on the property.
We already mentioned one, right?
We don't have to worry aboutpopulation density.
So, you know, that some of thebetter deals come up in those
(05:48):
lower population density areaswhere they're still getting
good, rate of return on theirrent, they just have less people
there.
It may not be a rural in natureproperty.
So, you know, why not be able todo the loan just because of a
simple population densitynumber?
So that's why we love it here.
(06:09):
And that's why I definitelywould recommend this program.
As as one of your tools to beable to offer.
Now, there have been somechanges because in this program
since, the last presentation,because there have there.
The market is evolving, right?
We mentioned this all the time.
How non Q.
M's liquidity is increasing in.
(06:32):
And when the liquidityincreases, that means there's
more players in the secondarymarket looking To buy this type
of product, right?
So greater liquidity is going tousually mean more relaxed
guidelines, right?
They're trying to open up themarket to get more business.
(06:53):
So not only are they going, youknow, they're basically going to
give us favorable options.
So not, not only may they, youknow, mess with the LTVs, but
they also are going to tweak.
items like the DSCR.
Previously, we needed a minimum1.
1 DSCR to be able to do thisoption, but now due to all the
(07:13):
different options that we have,we can go as low as 1.
0 DSCR.
Up to 3 million.
Now, please know that there aresome differences in this program
when compared to our usual DSCR.
I mean, you're not going to geteverything you want, right?
They got to put some amount ofrestrictions.
(07:36):
So, purchases will use the lowerof the current rent.
If the property is occupied, youknow, like they go into the
property and they ask thetenant, how much rent do you
pay?
Tenant says 1800.
That's what they're going to puton the appraisal that the tenant
is paying unless a lease hasbeen provided.
Sometimes there is no lease.
(07:57):
So it's got purchases.
We'll use the lower of thecurrent rent.
or the market rent on theappraisal 1007.
Refinances will use the lower ofthe lease or the market rent on
the appraisal 1007.
Now notice how this programtreats vacancies.
(08:19):
Vacant units get anywhere from a10 to 25 reduction.
And, rent off of the marketrent.
Obviously if it's vacant, it'snot rented.
So we go with, with the marketrent and that's going to depend
on how many units are vacant onthe reduction that they're going
to give unless the property isbeing used as a short term
(08:41):
rental.
Please note there's a maximum 35percent vacancy allowed on a
refinance, again, unless theproperty is being used as a
short term rental.
Now, keep in mind also thefollowing, we have multiple
options for this program, morethan one.
So, these guidelines are acombination, and whenever I can,
(09:04):
I'll, I'll state that this isone over the other.
But just know that this is allis, is good because it It shows
the flexibility that we have.
In being able to place theborrower in different options
for this 5 to 10 unit smallmultifamily loan option.
One of the great, one of thegreat new features now, again,
(09:26):
1.
0 DSER up to 3 million, that's anew feature.
The ability to use short termrental income.
To, you know, to calculate theDSCR and qualify the borrower is
another new feature for these 5to 10 unit small multifamily
properties.
Previously, they were long termrent only, and on the short term
(09:47):
rental, just like in some of ourDS, our regular 1 to 4 unit DSCR
options, we're able to use shortterm rental revenue reports.
We're able to use AirDNA onpurchases and refinances when
the property has recently beenput into service because it was
just remodeled.
And we're also able to use bankstatements evidencing the short
(10:09):
term rental deposits.
So those are pretty interestingfeatures on short term rental
that were not possible before.
I'd say seven months back, six,seven months back that this was
not available, but it is now.
So what are our eligibleborrowers investing?
(10:32):
Well, you see right there, I'mgoing to jump right to the bold
red.
Foreign nationals.
We do have options now on the 5to 10 unit DSCR for our foreign
national borrowers.
The same option that allows usto use short term rental income
also allows us to use to offerthis to foreign national
(10:55):
borrowers, which Until recentlywas not possible.
Please note in thatinexperienced investors only
with either if they don't own aproperty, if they, if they don't
have at least one year'sownership, they should have at
least one year's smallmultifamily management
experience.
No experience for first timehome buyers are considered on an
(11:17):
exception basis.
It's going to depend on themerits of the file, right?
Compensating factors.
So US citizens, permanentresidents, non permanent
residents.
And four nationals are possible.
Vesting and individuals ispossible.
Prefer, in a us based entitylike an LLC or a corporation,
(11:40):
please know that one end you,you cannot have layered entity
ownership.
Right.
That's a definite complicationthat can happen.
If you do, then that's anotherturn it in for an exception, and
see if they'll take it.
But what you definitely cannothave is any foreign based
(12:01):
entities owning any property norany foreign based entity owning
the other entity.
That'll definitely disqualifythem.
And please note that IRAs, blindtrusts, land trusts, and most
inter vivos revocable trusts arenot acceptable forms of vesting.
(12:24):
So when in doubt, grab all ofyour entity documents.
Turn them in for, for a previewby underwriting and they'll
confirm for you if they areacceptable or so, what are our
credit and asset requirements?
(12:47):
Well, again, here, remember,drawing from multiple options,
trying to highlight.
The strengths here, how flexiblewe are in our commercial option.
We can go as low as 650.
You heard me correct.
650 in our DSCR hybrid option.
(13:09):
We can go as low as 660.
Now for maximum LTV, our hybridDSCR option is maxed at 75
percent for a purchase.
And 70 percent for an LTV for acashout.
Now, keep in mind, obviously,our hybrid DSCR option is going
(13:30):
to be a little bit more relaxedthan the commercial option,
except for the LTV, right?
And the credit score being alittle bit lower.
But the fact of the no zip codesituation that we don't have to
take into consideration, that'sa big one.
Which adds some additional riskto the system.
To the file, hence the lowerloan to value of 75 on the
(13:52):
purchase and 70 percent on thecash out for the hybrid and for
a commercial option purchase, wecan go 80% LTV and cash out 75%.
And now a very interesting pointhere to note with our commercial
option, 90 percent combined loanto value is possible with a 75
(14:16):
percent LTV first and a 15percent LTV seller second.
That means First mortgage fromus, 15 percent second mortgage
from the seller.
Seller's going to have to holdthat paper gifts with a minimum
5 percent borrower contributionare possible.
(14:38):
So far now the gift cannot beused to meet the reserve
requirement.
So if your down payment is 25%,you gotta have, you can have a
20 percent gift.
And 5 percent down payment fromthe borrower and the bar also
have has to have assets that canbe verified to meet the reserve
requirements.
(14:59):
And what are the reserverequirements you may ask?
Well, they vary again betweenoption to option.
So I'm going to give you thetypical reserve requirements.
And from there, you'd have to gointo the specific guidelines for
the option you're looking at tosee how they vary.
So you're looking at up to amillion dollar loan amount,
three months reserves required,six months PITI.
(15:23):
Now we're talking six months ofPITI, three months of PITI.
So six months PITI for amillion, one to 2 million loan,
nine months PITI reserve forloans over 2 million and three
months for each additionalproperty.
And this is max 18 months intotal reserves you could ever be
(15:45):
asked.
So those are the reserves thatwe're talking about that cannot
be met with a gift.
So what are our minimum propertyrequirements?
Well, minimum propertyrequirements, you're looking at
minimum size of 400 square footper unit, right?
(16:10):
So that's not that big.
Now here's a really importantnote.
Each unit has to have a fullkitchen and bathroom full
kitchen, meaning a range to cookwith.
I mean, if it doesn't have anoven, you could probably get
away with that.
If it has a built in cooktop ofsome type that's permanently
installed, you could probablyget away with that.
(16:31):
Could have a, you know, atabletop type oven, but you do
need to have, you know, fullkitchen and a full bathroom.
Now here's one that can, Thatcan come back at you without,
you know, what's happening onthe appraisal.
The property use has torepresent the highest and best
(16:52):
use for the property.
Now that should usually not bean issue for a multifamily
property.
Being a multifamily property.
Can't usually use it for toomany other things.
But, you know, maybe an issue ifit's surrounded by commercial
properties and is the onlyresidential property on the
street and the appraiser feelsthat the highest and best use
would be to convert the propertyinto a retail shop and rent it
(17:14):
for more money per square footthan residential, that can
happen.
Now, the property cannot berural, right?
That means that the appraisercannot have stamped on it rural.
However.
You are able, to have a propertywith anywhere from two to 20
(17:36):
acres, right?
So that's, if you have 20 acres,you may be rural, but just know
you are not, it is notautomatically gonna disqualify
you if you have a big acreageproperty, I guess is the point
I'm trying to make here.
Minimum C four or Q4 condition.
In other words, if it's C fiveor Q five.
(17:59):
It's a no go.
Minimum 12 months cash outseasoning for market value.
That's a little bit differentthan a regular DSCR.
The property cannot have anyenvironmental issues, no
excessive nor structuraldeferred maintenance.
(18:22):
And here's another, a realinteresting point.
Any unleased units.
Must be in lease readycondition.
So that can catch you bysurprise.
If you think they're going touse the market rent over the,
lease rent, that's, they will dothat, but the unit cannot be in
(18:45):
a position where it needsrenovation.
It's just, it can be vacant, butnot needing a whole bunch of
stuff.
So you can see how in your, fiveto 10 unit multifamily is a
little bit different.
Then, you know, once you goabove, you know, 11 to 20 to 30
to 40 units.
(19:05):
So this is a really good sectorof the market, which is, I
believe to be a little bitunderserved, depending what part
of the country you're in, youcould have a lot of these types
of properties.
These types of properties tendedto be developed, you know, not
new, phenomenon, right.
The small multifamilies.
So depending on what part of thecountry you're in, I mean, if
(19:27):
you're in the suburbs somewhereand everything is from 1990 and
2000, you probably won't havetoo many of these properties,
but if it's an older developedarea.
You probably will have manyopportunities to finance 5 to 10
unit multifamily properties.
So here at the mortgagecalculator, our loan officers
(19:47):
are, loan consultants and candefinitely be there for you to
help structure your smallmultifamily properties, either
as a DSCR.
Or as a commercial, right?
But typically most of ourborrowers are going to like that
pure DSCR option because some ofthe commercial options may go
(20:08):
DSCR on the property rent.
But then have some type of apersonal financial statement
that needs to be provided by theborrower to make sure that
they're able to cover their ownpersonal expenses.
So looking forward to helpingyou all structure your small
multifamily loans here at themortgage calculator.
(20:34):
All right.
Thank you, Jose.
Okay.
I don't see any questions here.
I see one question, but I thinkit was already basically
answered.
Oh, here comes a question.
Okay, let's put it on the screenhere.
Jose, do we currently have nonDell options for this or
brokered options?
Yes, we have, we have, all theoptions that I mentioned to you
(20:57):
that I, shown here today werenon Dell.
The commercial option.
Is a, brokered option as our,our commercial options.
We don't fund the commercialloans, but we certainly fund all
of the DSCR loans up to theeight unit, I believe we can
fund those in house.
(21:20):
All right.
I don't see any other questions,so I think we can go ahead and
wrap it up.
Now, tomorrow is actually aholiday, so we normally do this
Tuesdays, Wednesdays, andThursdays at 7 p.
m.
Eastern, but this week we willjust be doing it Tuesday and
Thursday, so we appreciateeverybody tuning in, and we will
see you on Thursday at 7 p.
m.
Eastern for the next episode ofthe Loan Officer Training Series
(21:43):
with the Mortgage Calculator.
Have a great night, everybody.
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