She’s Got Assets Live Stream on DSCR Loans

Watching from Northern California. Awesome, thanks for tuning in. Awesome to have you. We have a really fun show tonight. I have a special guest. I'll do an official intro, but this again, this is Shawna from She's Got Assets, and I have Doug Jacobson on. He's been my go-to mortgage broker for a long time, so I'm— we're going to get started in a few minutes. Um, yeah, just let us know if you can see us, hear us, where you're calling in from. Awesome, Maria, thanks for letting us know. I think the Technology is working. Yay. Um, well, Doug, yeah, well, people are waiting. Um, it's just, it's been really— we've— for anyone tuning in, we've been working together for a long time, done a lot of different kinds of loans. And one of the things I love about real estate is leveraging, you know, equity and assets. And Doug has really helped me with that a lot. So appreciate it, Doug.

Yeah, you've been amazing.

Thank you. Um, yeah, well, let's— let me just— let's get started. And as people are calling in, we'll kind of dive into things. But Doug, this is Doug Jacobson. He's been my go-to mortgage broker. He's based in Oregon. Thanks for having— coming on.

Yeah, thanks for having me.

Appreciate it. So yeah, Doug, I'm sure you can give it— maybe it's a little nutshell bio, kind of what you specialize in, where you work out of.

We have a nationwide audience, so I know you're may not be everywhere, but yeah, I mean, we're, we're pretty much West Coast, unfortunately for us, but, um, we're adding a few more states. But we do all residential commercial lending, and we specialize in kind of unique loans like the DSCR, bank statement loans, investment loans, hard money loans, all sorts of these different avenues to help people, um, you know, add real estate to their portfolio. And as Shona, you know, does it, uh, so do I. And, uh, there's some great tools out there for investors to use, especially, you know, the DSCR and, um, and bank statement loans for, uh, self-employed borrowers that maybe don't show as much income, uh, on tax returns or write off more on the real estate, um, and don't show enough to qualify with those.

So awesome.

Well, yeah.

So let's kind of dive in, Doug. So I think for— I mean, this is kind of a group of investors, maybe, you know, medium to low experience, like, you know, traditional loans, like kind of let's start from there, like a traditional, like conventional loan, and then we can kind of get into like the DSCR and the more creative stuff. Like, that would be super helpful, I think. Yeah.

Well, you know, conventional loans, finally, as we all know, rates have been horrible for a bit. So we're finally starting to see some better rates. We saw actually down below 6% for the first time at the end of last week, or at the start of last week, and we're back down there pretty much today, which is great for conventional, which is wonderful. Um, and you know, those are mostly tax returns, 2 years of tax returns for self-employed, you know, full documentation for W-2 borrowers. Um, pretty much go up to all the way up to 97% loan to value on first-time home buyers and 90, uh, 95% on those that have that own homes. We also have some great down payment assistance products that help for first-time home buyers and those people without down payments. And then obviously we have our government— VA, FHA loans, USDA loans— you know, those are, those are great loans as well. And, you know, that's kind of your normal, you know, easy loans, the straightforward loans, I guess the vanilla loans more than anything. Then you get into, you know, I think we talked about it, you know, the, the big ones that are kind of for investor tools, the DSCR loans, which are really neat, especially when rates are a little bit lower than they are today. But bank statement loans are a good option as well. The DSCR loan, the debt service cover— coverage ratio loan, basically just qualifies you on the property that you're buying. You don't have to have income for anything else. You're just showing us what the asset's going to bring in for rent. If it's vacant, we're just going to use, um, a 1007 appraisal with the rent roll analysis to give us what the property is going to be able to rent for. And it's got to be a long-term, um, you know, coverage for the appraisal. So we, you know, depending on that, we can go 1:1 on the ratio. So you're payment on the DSCR loan needs to be about equal to what it can rent for. But we also have lower— we can go all the way down to 0.8 in case it comes in a little bit light. Or the best option, if you're renting the property and let's say that appraisal shows that it can rent for less than you're renting it for, we just need 2 months proof of receipt of the payment on the property. So The nice thing about DSCR loans, you can use them for cash outs, rate and terms, and purchases. Our purchase money, we can go all the way up to 85% loan to value if you have a high enough rent on the property. We can qualify that on an interest-only payment, which is kind of nice because that keeps that payment down and allows you to qualify for a bit more as well. On the cash out refinance, we can go up to 80% loan to value. And then, um, and then we have some options on investment apartments, 5 to 8 unit apartments that you can use on DSCR as well in case you're having trouble qualifying with taxes and/or other things. We can go to 75% on those, but those are a great option. The other option that I'm really liking right now that is helping a lot of self-employed borrowers in real estate and other options is the bank statement deal. We can do 12 months and 24 months bank statements. Let's say you have 3 different businesses, we can combine 3 different sets of bank statements for 12 months. And if you only have, let's say, up to 10 employees, we can go 95% of the deposits into those bank statements and not have to take out any deductions of what you're paying out of those and use that to qualify. So that sometimes helps you get a much lower interest rate, um, than maybe a DSCR loan, because DSCR loans are a little bit higher on interest rates right now. They're not horrible, but they're a bit higher, especially if you're going to max loan to value.

But well, thank you for that. I think that's to unpack that or emphasize— so if you're someone that's starting out in a full-time real estate, you know, you're self-employed, you don't have that magical W-2, this These products are amazing. I think sometimes we think— I mean, I love creative financing, but I also like to mix it up with, you know, these kind of products. So that's the beauty of this, is based on the income the asset is producing versus your personal income, right? That's like the big difference I just want to underscore for anyone that didn't catch that.

Well, and, and the nice part right now is finally we're starting to see these non— I call them non-QM non-qualified mortgage products, the pricing on them has gotten much, much better and closer to conventional. So I think that's going to continue to move closer because our bank statement products right now for self-employed borrowers are only about a, about a point higher than a person with tax returns, which I know it sounds like a lot, but it's still better than 2 points and, um, and can get you into a home.

Yeah, yeah, that's awesome. I think the other thing that I think I want to just dispel too is that you can use these products on investment properties, right? There's like such a big difference between owner-occupied and investment. I think there's a lot of misconceptions about, you know, doing a cash-out refi investment versus owner-occupied. So just maybe address that a little bit because I have heard people— I don't know if people really get that, and it's really powerful.

Yeah, so I mean, you can do these, um, As cash-out refis on investment property. So one benefit is, let's say you're buying a, a property right now on a DSCR loan that rates, let's say, right over— let's say it's 8%, you know, because rates are high on these products right now. And rates go down because, I mean, as Sean and I know, just a few years back these rates were under 5%, you know, on these DSCR loans. So they're going to be probably back, maybe not as to that level, but probably, you know, between 5 and 6, you're going to be able to take cash out of that property when you get it profitable on, let's say, a midterm rental or into something where it has more debt service coverage ratio. You— so if you can get in there, you find a property in the right spot that Jonah is able to help you, you know, change that midterm where you're getting a lot more rent, we can go off of 2 months of receipt of that payment instead of the appraisal. And then you can take cash out for your next one. So if you buy them in the right, you know, so you can kind of stack them and, um, and take that cash out fairly quickly. You can take it out within, um, after owning it for 6 months, depending on, you know, I guess I got to preface that because the DSCR loans do come with a prepay. So a lot of times you have to buy them out, which we, we do for clients all the time, but you just got to know where you're going to be at, you know, and kind of think forward, but you're able to take cash out of these very, very easily. DSCR loans, we don't look at any of your other assets. We don't ask for a job to put on there. We don't ask for any income. We're just covering the loan with how the property is performing or will perform on appraisal.

And that is a beautiful thing. So just to clarify, if you're using this, like say you're going to purchase a property as an investment with this kind of a product, you're, you're— that's— you're just going on like projected rent roll. How do, how do they like short-term versus midterm? You break that down a little bit as far as that goes.

That's where it gets a little bit dicey because, you know, at the first, most of them are looking at long-term. Now that's starting to shift because so many people are starting to move to midterm because it's so much more profitable. Um, and but the only downfall with that is if you're just buying it, we have to go off the long-term. And so you either have to a little bit more money down or make sure that it covers right, and then get it into the midterm where you're starting to receive that monthly payment. And as soon as you have it for 2 months, then you can switch that to a, um, you know, to take the cash out on that higher rent that you're receiving on the property.

Okay, so you're buying it as like the long-term rent rule, and then you can, as soon as you have a couple months You could. Okay, got it.

Exactly. You have to be in the property a minimum of 6 months before you can do a cash-out refinance.

Okay, perfect. So as far as like, you know, I mean, I think the other thing is like qualifications. It's just so— I mean, there is an appraisal, right? But you're not giving your firstborn. I mean, underwriting is definitely thorough, but it's a lot easier in my experience than traditional.

So much easier, especially when you own a bunch of properties. It's just I mean, it is slam dunk compared to doing a regular, you know, loan for sure. Yeah, there's—

yeah, yeah, that's been my experience. And I mean, also, like, you can do a couple of properties. It's not just one, right? If you have equity, like I like to call it trapped, right? If you want to leverage that, this is a great product for that.

Yeah, exactly. You can do as many as you'd like, you know. You can own— there's no, there's no true limit on how many you can do because it's a non-QM. It's not There's no max. It's just, just based on how the property performs is the key on those. Um, yeah, and again, super easy.

And I think the other thing too is like we get a little caught up in interest rate, but we know they're gonna, they're gonna come down. You can always get out of this, right? It's not forever, especially if it's interest only, right? This is not a forever loan, correct?

And that's why a lot of the ones that we're doing right now, we're doing very short prepays, if any, because we want to make sure that people can get out of these and refinance them down because no one wants these interest rates on anything. You know, current interest rates, I mean, again, they're starting to go down, but not like, you know, a few years back.

Yeah, yeah. No, we're— and we're always going to look back at like, you know, property prices. So I think my personal opinion is if you have equity, there's lots of reasons to leverage it, especially if you're going to buy another property. Like a couple of years ago during COVID we had like an epic refi, Doug. I think it was 5 properties. It was during COVID We're in California.

I remember that.

That was a lot. It was like this much paper, but I was so appreciative. Made all this equity and then it allowed us to buy a duplex that we've midterm. So I'm a big believer in leveraging your equity. This is a way to get it out. There's lots of ways, there's creative ways, but this is a really great kind of more conventional way. So So just to recut, like, quickly recap, right? It's based on the income of the property. You know, I think the other, other lesson I had recently was, you know, the higher your rent is, the more you can take out. So that's another reason why, like, an MTR strategy is really great as far as what you can pull out of your property. So, Doug, if you want to speak to that a little bit, I think—

well, yeah, exactly. And, you know, with rates higher right now, you know, I mean, what most people are saying is when rates do go down, I mean, that's going to be a flood of people to the market. Prices hopefully go up. So it's a good opportunity right now to leverage the DSCR and let the person that you're maybe buying the property from saying, hey, well, the rent doesn't offset this payment, so this is where we need to be. And hopefully, you know, being in the driver's seat a little bit as a buyer still right now, um, being able to leverage these higher rates to maybe get a better deal on a property and then wait till rates go down to see that property expand on, you know, and take that money out and do it again. But like you said, I mean, I, I think the DSCR loan, especially for an investor, is, um, a great way into a property, um, for like, you know, very, very easy way to start and to set up and get those. Because I mean, as we all both know, I mean, we've been in this business a long time. I, I have anyways. And we know that maybe prices go down, but they're going to continue to go up. I mean, at some point, and I have a feeling that when rates do come down, it's going to be pretty fun.

You definitely— yeah. Okay, well, is there anything else, like common questions you get or like tips to like how to position yourself? I mean, obviously get the most rent. The 2 receipts thing I think is really helpful. Any other things you would add to the kind of best way to capitalize on this?

Um, well, I think you've nailed it. I mean, the midterm part of it, I mean, right when— now what I'm seeing on my rentals anyways, the ones that I have on midterm a lot better than the ones I have in long term. I hate— I mean, I like them both, I will say, but I would much prefer them all to be in a midterm area just because I know how much more money they make. And, uh, I think we're starting to see the tools finally in, uh, how easeability of use of those tools to manage those and, and to be profitable on those. But more importantly, to make it so you can leverage that real estate and build more and take that cash make yourself a lot of money.

Yeah. Do you think that underwriting will ever kind of catch up to like, instead of underwriting as long-term, they'll catch up to like, hey, this is a midterm or short-term strategy? Are there some products that do that?

Um, they are— there are. They're— so they're starting to get to that, to where they're using— because all the tools, like say that, you know, obviously the big ones, uh, Airbnb, all these big— they have all of the ways, so they know what to look for and how these short-term. So they're, they're using that technology and others to show the rents much easier, and underwriters know how to look at that and say— not be confused. But they're using 100% of it, which is pretty impressive. Um, it was that we needed for like 12 months, but now they're reducing the time frame on it because so many people are using those short-term rentals to qualify. So we're seeing more and more probably, you know, of the DSCR loans and other loan options using the short-term strategy as far as the rents, meaning we only need 2 months of the payments on them, and then we can use that rent, which sometimes is double what a long-term rent would be, which means that, oh my goodness, now your, your property's worth a ton of money. Now you can access all that extra cash, whereas you couldn't before. So that's a really neat tool for investors to access cash, especially in those markets that are, um, you know, are different, difficult to cash flow on, on a long-term rental. Yeah.

So kind of, I'd be— I'd let— I don't know if this is too on the fly. I'd love to kind of walk through a scenario of like a midterm rental, like what you could pull out, how you would run that, like what the rent is. Is that something we can kind of do on the fly to show people kind of like— so let's say like the value is, I don't know, $600,000, we're making $7K a month, like this is a midterm, we have 2 months of receipts. Um, I don't know what you— maybe you owe like, let's say you owe $400. I don't know, I'm just trying— or what do you think? I just wanted something.

Okay, so $600, let's just say you go to a, a 75%, which would allow you the better interest rate than an 80%. That would get you $450. But let's say even 80% because we're going to have to go to 80% on this one. Okay, because it— that'd give you $480. And today's interest on that would make the payment, you know, on your interest-only payment, roughly $3,400. That doesn't include taxes and insurance. That's, that's, that's kind of a today's, today's rate right there at that max LTV on an interest-only payment. But the best part is you're going to qualify easily because you're way less than 1.1, and now you're at 1.25, so you'd get a quarter reduction in interest rate because you've got so much cash coming in on that property. But it would let you go to 80% for cash out and very easily, even though the appraisal probably only say it rented for, let's say, I mean, I just had a $600,000 investment property in Beaverton say it rented for $2,850. We both know that that's not really the case. It's, it's a much nicer home. It's going to rent for close to $4,000 even long term. But sometimes appraisers are off. And so that's what I really like with the DSER loans and the underwriters with them now is they're taking proof of what you're, you're getting for the rent. And even if that appraisal comes in short, and let's say you don't have a good lease in place, they are letting you get a new lease and proof of deposits for 2 months, and you can, you can go off of that. So, you know, obviously you got to be legitimate, you got to have a real lease, and, you know, I'm not saying to do anything weird, but, you know, there, there's ways to make these things work if you, if you can find the people to rent the properties for those, those amounts.

And so as far as like receipts go, like if someone books, like sometimes I get people booking directly on Airbnb, is that sufficient if it's not like an actual lease, it's just kind of a receipt of that?

Okay, yeah, they take, uh, they take that and they'll show that, um, as, as, um, you know, or, you know, other tools like, you, you know, there's other tools in Airbnb as well. But yeah, I mean A lot of the times these midterm rentals maybe are on the same lease amount, you know, for like 3 months, or they're, they're short terms. Those are the best because we're not seeing huge variances on, you know, the income, because the income fluctuation, let's say, on a cabin in Government Camp might be great in the summertime, wintertime. So it's like going to be a little bit different than one that you've got a short-term, more of a midterm, I guess, you know, as you say.

So Um, so yeah, I mean, that makes me think, like, if you're gonna do this as a strategy, like, get, get your, get your midterm, wait 2 months, and then strategically start. Like, just do it. Don't do— like, make sure you have your ducks in a row with your rent income.

Do it. You get your ducks in a row and have that same payment because it makes it much more clear for an underwriter. That's what I would recommend. Yeah, because they really like to see that. They don't want to see one month that gets $1,000, the next month it gets $4,000. And you don't have any set, you know, because then they're going to be like, boy, that's, that's way too, you know, fluctuating. And they're going to want to see more. They're going to want to see 12-month average on something like that versus a midterm that you've got a 3-month lease at the same amount or something like that.

So I never thought about that.

But, you know, here's, here's the thing. There's other ways to look at these too, because let's say you have bank statements for 12 months and you have all this rent going in there. We can use 100% of those too. And even get a better interest rate. So it's all about looking at this stuff. It takes no time for me to review, you know, any of that stuff. So even if you're not in the state, I'll still review it for you and do a calculation on your, uh, your cash flow on those things. It takes me no time to do that. And, um, at least you know, you know what you can do.

Yeah, no, that's what I love about working. I feel like you're very consultative, even like when we were doing more conventional, like kind of doing that credit magic and stuff to get, you know, the extra juice out of things.

Like you said, we can do rapid rescores for people all the time that don't quite have the score for a, you know, for one of the better rates on these DSCRs. We'll definitely do those rapid rescores to get you up because it's so easy to get people's scores up to help get that better rate.

So yeah, so what are— what— how— I mean, how quickly can you affect your credit score? It's all— I mean, I think it's related.

Super. I mean, we do them, you know, if we We look, we do what-if scenarios to the different credit bureaus, to TransUnion, Equifax, and Experian, and it'll tell us exactly paying down this card by $1,000 will jump it up. So we just look at the best way to get it the best amount for a client with the limited amount of money, you know, maybe $2,000, whatever it is. But usually there's an easy way to pay down revolving debts to get your scores up significantly, and it takes a week. So As soon as we get the documentation showing the new balance, we send it to the credit bureaus and they'll have it back to us on a rapid. It'll be done in like 2, 3 days. On a regular, it's about 5 days, but it's fairly quick. And it keeps— what we like to do is if one of the scores is up above 750, we only like to do— we don't want— we only want to impact one, if not two scores, and leave the other one alone so it doesn't get a hard credit pull for that. So we try to impact the clients. Credit as little as possible that way. So we can keep— because credit, credits are— credit scores are good for 120 days. So realistically, there's going to be one score that we don't have to touch because we off the middle of three and we just mess with the other two, uh, for the client. But, um, yeah, there's some great ways to save a lot on interest rates by increasing credit scores.

And that when those are the three credit bureaus, is that what you mean by messing with Experian, TransUnion, and Equifax?

Equifax.

Yeah. Okay. Okay.

Yeah, we go to a credit company that allows us to go direct to them and update those for, for clients.

Okay. Okay. So that's great. When I think that, like, so the— and just to step back a little bit, what I love about working with someone like yourself is, like, you were on it. You're very, um, strategic, I feel like. And also you have access to lots of different products. Like, if you go to just your bank, I feel like it's— they just have their you know, their boxes. And if you don't fit in the box, and I feel like you can be more strategic and more creative, is my feeling.

You know, I, I think you have to be bank— we, we bank and broker just because you have to have every tool right now. I mean, there's just not enough of them out there.

But they're—

hey, there are, they're just too expensive right now. It's the problem.

Yeah. Um, and the other thing, just emphasize, like, you can always— you, you can get a loan, right? You can always do a rate term refi. You're not locked into these things. I think we get really hung up on rate, right? But I think that's it's not fixed forever. So correct.

I mean, the only downfall with some of the investment DSCRs is we got to be very cautious with prepays because most of them, all of them, want to put a prepay on there because they want that high yield. So we got to be very strategic on those to make sure that we're not doing a long prepay or buying out the prepay altogether so that you can refinance quickly. So yeah, but owner-occupied, no prepays at all. It's just those investments on some of the unique products, non-QM they allow those prepays.

Okay.

However, we're very diligent about that because, you know, I know I don't like prepays.

And just for someone that doesn't know that, you— if you do, if you do a loan and you decide to like refinance or sell, then you're gonna— you can get penalized for— there's a fee you're going to pay because they're losing that revenue, right? Essentially, correct.

And it's, it's expensive, so you definitely want to buy those out or limit it to a 1-year prepay. 2-year if you think you're not going to be able to refinance it within that, but no longer. I, I wouldn't recommend it anyways.

Yeah, that makes sense. Um, and as far as, you know, just types of properties, I mean, it seems like these are really for— is for an investment property. That's really the main— is it like up to 48? Is there like a limit on—

no, no. So yeah, we do them on, uh, we all— we do these DSCRs now on 5 to 8 units as well, and we do have some for bigger ones. It's, it's a little bit more difficult because they limit that loan-to-value down to 70 at the over 8 units, but 75% on 5 to 8 units. Um, okay, on the DSCRs as well.

Uh, can you— so let me ask you this, it's been a while— can you have a sec? I know DSCR, they're going to wipe out any debt they need to be in first. Can you bring in a second or add them after the loan, or what's the—

absolutely, if you can get a second, you know, you can definitely add a second.

Yeah.

Um, you know, I mean, obviously on investment properties, typically those are you know, basically private notes. You know, a lot of the times it just— it's harder to get— it's harder to get good seconds on, um, on investment properties. On primary residence, super easy, you know. Uh, but yeah, there's no— you can have seconds. Yeah, absolutely.

So you could— if you were doing a DSCR like on a multi-family, you could have— you could do record as someone in second, or do you have to come in after the fact and add them as a second?

You would— I don't think you could do them combined. You'd have to come in after. They don't allow CLTV on top of it. So they wouldn't allow the first and second record at the same time. No, I'm sorry, they wouldn't, they wouldn't allow it.

Okay, but you could come in like in theory a week— I mean, just wondering how— is there like a time frame where you can do it anytime afterwards?

You're not, you're not— you can, as long as that the, the first, the DSCR loans in first lien position, that's all that matters.

Okay.

However, they won't do it simultaneously.

Okay, okay. So you have to have that money, then you can always come in with a second. Okay, good to know. Um, let's see. Okay, and do you— I know this was a thing in the past— you have, when you're coming in with that down payment, does it have to be seasoned anymore? Is that still kind of common, or can you just— is there— what are the regulations around that?

You know, here's the thing with DSCR, they're not, they're not as concerned with the, you know, to see that. Now they do have some reserve requirements on these. Now they want to see that, um, like 2 months, especially if you're a first-time investor. They just want to make sure that you're not going to get stuck being able to not make payment, um, and on that. But as far as you mean gifts and things because of investment, you know, on normal conventional or kind of a— you can't do that. DSER is a little bit easier because it's non-QM on where the money comes from, so they're not as hard and rigid on that. Um, they're, they're rigid on the, uh, reserve requirement. They want to make sure you have some of your own funds.

Um, okay, so what kind of reserves are they looking for? Is it a couple months of rent?

Two months of rent, yeah, two months. That's what they're looking for. And if you If you're doing a cash out, you can use the cash out for the 2 months.

Okay, okay.

So you don't have to have any on the cash out. You don't have to have any.

Are they looking for actual— like, can you use like a self-directed IRA or anything like that?

You can use all that stuff, is allowed, um, on that, on the DSCR. So you can use, uh, retirement, you can use, you know, bank statements, um, all that stuff can be used.

Okay, so I'm just thinking creatively this second. You could, in theory, if you have multiple assets, you could secure a private money loan on a different property and then move them over to the property once it closes if you wanted to get creative.

Um, yeah, absolutely.

Um, so let's open it up for some Q&A. We'll definitely— Doug, we'll share your information. So you're, you're West Coast, right, primarily, as far as— okay, got it. Okay. But I'm sure— do you have recommendations if someone's kind of out of your territory?

Oh, yeah. I mean, we've got people we work with all the time, all over the nation. We've just been able to be busy enough on the West Coast that we really haven't focused outside.

Okay, so I see some questions. I'm going to go read through them. But guys, Doug is a great resource. This is your chance to ask all your questions. So I will put Doug's contact info in. So Charlotte's asking, if I am correct, you can apply for more than one DSR, but do they hit your credit? So it's a hard or soft Paul, uh, when would you start to pay back the DSR? 30 days, or—

great question. So, you know, as soon as you buy the house, let's say you buy— let's say you were doing one in August, you know, you would still— it'd be like a normal loan where you would miss your September payment and your first payment would be in October. So there's always that 1-month lag when you're buying. Obviously that interest never sleeps and comes back on your payoff, just to be clear. But, you know, you do— you buy it, you miss the first mortgage payment, and then it's— that's October if you were buying it this month. As far as the, um, the buying and your credit pulls, we can do soft credit pulls up front, but in order to get through it, you have to have one hard credit pull on your credit, um, to be able to get it through underwriting. So they do require a hard credit pull to get these done. We can't do them on soft. Um, but it's— one's good for 120 days. Um, we won't re-pull it. Sometimes it takes a long time to, to find a house, and, you know, if credit's great, you know, we're not going to re-pull it 120 days until you find a house. We just tell people to make sure they're continuing to make their— or all their mortgage payments, all their car payments, and not add any new debt. But, um, yeah, unfortunately you do have to have a hard credit pull to get anything done right now.

But if you are like considering this, you could kind of do a soft and do like, hey, here's what we're looking, kind of just informational.

Absolutely. You could just tell me what your, you know, credit— I mean, if you know your credit scores are 720, you know, and you can pull a Credit Karma, you're going to know that you're going to be fine. I mean, it's not going to come in at 650 for me, you know. You're going to be above what we need to be, and we can wait on, on the credit pull. We can also do a soft credit pull so it's not going to affect you up upfront to get you that pre-approval until you're ready to buy, um, and do it, do it that way as well. So we do do soft credit pulls up front if people don't, don't want a bunch of calls from solicitors and all that other stuff. Well, I hate to say it, when you pull credit, trigger leads are sold to mortgage companies. And as we both know, with rates the way they are, mortgage companies aren't as busy as they used to be. So those trigger leads have people, our clients' phones, really busy.

Um, so yeah, and they will act like you applied. They're pretty— they're a little sneaky.

They're good, they're sneaky. Yeah.

Um, okay, let's see some other questions here. Um, um, let's see. Okay, so prepayment penalty, I mean, I think, Doug, you can kind of buy that down, right? I think like with ours, we're going with 1 in 2 years, but someone asked that, like, what the, what the terms are on that.

Yeah, you know, if you don't do anything, it's a 3-year time frame. Don't do that. Um, but you know, you can do 1 in 2 years, you know, you can buy it down. I mean, it just depends on where you're at and where you see yourself. So both work well. I mean, obviously I'm— I don't like prepay, so I like to buy them out. In fact, every prepay I mostly have bought out 100%, but I've kind of kick myself a little bit because most of the time it takes me at least a year to, you know, refinance or do anything. So, right, you know, I think a 1-year or even a 2-year isn't a bad— but 1 year for sure I think is, is a fair time because it, it takes— time goes fast, I guess, really fast.

Yeah, it's surprising. Like, I feel like we just did— I don't know, I feel like we're always doing some kind of refi or something, just like it's been years. But I think it's just happened. Um, okay, any other questions? Doug is a great resource, so if you guys are considering this— um, okay, Susan's asking, what percent can you prepay?

What? Oh, per year you mean? Um, so per year you can do up to 30%, uh, prepay. I believe it is 30% per year. And I— every investor is a little bit different on that, so, but There's one primary one that we— I typically like to go through because I get better pricing because of the volume we do through them, and that's why I use them, and they allow us to charge less. But 30%, I think, per year is kind of where it's at. But the problem is you can't reamortize it. So doing that, I don't know, uh, it's a, you know, you just— because your mortgage payment's going to remain the same unless you do an interest-only. If you do the interest-only option, that's kind of a neat way of getting a lower payment if you're doing interest only, which I'm a big fan of.

Like, it's not forever, but it can— I'd rather have some cash flow, honestly, and make sure my payments are covered. So I'm a big fan of that. Um, okay. All right, I have another question. Um, what if you have a 30-day delay on your second— let's see— on your second mortgage on personal home from last year? Will this kill your chances of getting credit scores in the 700s?

No. So you can have 1x30 and you can even have as many 30s as you want with a 0x60. It does reduce the loan-to-value a tiny bit, but there are options, a lot of options with 30-day lates in particular. When you get to 60, it gets a little bit more dicey or it gets, it gets more difficult in the last 12 months.

But it's kind of—

yeah, 60-day late. Yeah.

Okay. Okay.

But 30-day lates are easy. We get around those very easily.

Okay, good to know. But I do want to clarify that it's— DSCRs are always in first position, so you can't put them in second. You'd have to wipe out all your debt and just— right, that's kind of the— just correct.

You have to pay off— you have to be in first lien position, uh, to do this. So on a refinance, you couldn't leave an equity line open and think they're— unless you could subordinate it, um, but even then, DSCR loans are pretty particular and they don't like a lot of subordination behind it. So typically they're going to make you redo that second afterwards if you have one and pay off everything.

Yeah, okay, just to clarify. So I mean, if you have the option— like, that's why I love HELOC lines of credit, right? Because then you can keep your first position, right? If you have a great rate, you can come in with this. And Doug, do you do HELOCs, or is that— I know, yeah, okay, we do HELOCs.

I'll be honest with you guys, I mean, the problem with our HELOCs and any you know, broker or banker is home equity lines of credit. And I'm just going to be honest, especially on your primary, you can get them done free at banks. U.S. Bank, probably whatever credit union, they don't charge for an appraisal. There's zero. It should be prime plus zero. We have to charge title fees because we have to be put on the thing. They charge no title fees. Although it's only like $1,500, I'd still recommend going through them because that's what I would do. So We don't— we do them if we're doing them in cooperation with the first or something like that, like an 80 with a 10% second on a primary. And sometimes on— we do them on— but very rarely on investments, mostly primary. But to be fair, you can get a better deal.

Okay, good to know. And that's what you told me in the past. I've even gotten 2 HELOCs. I think those days are gone.

Yeah, but you know, rates are going to go down. I mean, September, they're talking even after the PPI, uh, data that came out this morning, they're talking about maybe in a 50 basis point cut in September, which would be great. And then that, you know, the nice thing is now if you set up a home equity line of credit on your house, you know, now's the opportunity before rates start going down and everybody starts going getting those and takes 60 days to get one because they last for 10 years on your, uh, your home. And, you know, as rates go down, they're talking quite a few cuts next year if inflation maybe checks in where it's at, because if we can get those home equity lines of credit down to like 5% again Well, now you can go use that to, you know, as your down payment or to pick up a property, um, much easier.

Yeah, that's a great strategy. I mean, that could be your— that your down payment and use a DSCR, right, for financing for the— yeah, that's a really good, um, really good combo. Okay, Sharon is— or Sharon, it's not pronouncing that right, um, should we get approved first and look for the property and also on the reserves because the funds from be a harder private money lender. I've been holding off but nervous. My credit's between 730 and 762.

Well, first off, good work on your credit. That's amazing. Um, and you know, you can— the biggest question mark on these things is finding the property and finding what the place is going to rent for and kind of knowing the area, doing a rent roll on the area, because that's what's going to really determine you know, what you're going to have to put down on the property. But yeah, you can come get pre-approved. I always recommend that. I think it's the best way to do it. So you kind of see the payments because that way you can text me a property address and I can say this is the payment on it. If it qualifies at 1 to 1, if it qualifies at 80 to 1, you know, so you can look at the different payments because there's— if the rent doesn't quite come in where it's supposed to be, you might have to put a little bit more money down. So it's It's kind of nice to know, um, upfront before you're making an offer on a property.

Yeah, yeah. And that kind of— I mean, that could affect your offer, or it's your pre-approval letter if you're going through an agent. They're going to want to see that. So I think it's just good to know what your buy box is. So 100%. And Doug, I mean, there's no— if someone can reach out to you and just start shopping, right? There's no—

absolutely. And like I said, I mean, here's the thing, like on that kind of credit score, we don't have to credit up front, but at least you can— when you start, I can at least give you real accurate information based on those credit scores so that you can use that information to make wise decisions in, you know, writing the offer and such like that. Because, you know, a lot of these times on this kind of investments, you got to make sure that you write the offer about how much it needs to come in for rent so that if it comes in too low on the appraisal, well, that gives you an out, you know, in case that changes your down payment or something like that, or um, it releases your earnest money anyway. Or there's certain ways to write it with your agent, and we can help with that as well to make sure that you're protecting yourself just in the case. Because like I said, that one in Beaverton, I was stunned when that rent roll came in so much lower than it should have. So these appraisers are great until they're not. So we have a panel of appraisers, and we take them off and make sure that we have appraisers that are going to do a good job for clients. And that appraiser's not on our panel anymore.

So, so what do you do in that situation?

If—

do you go find different data, or how do you get around if we don't have—

well, I had to take the, uh, get a new appraiser, go, go somewhere else because I wanted to make sure that I could help the client. And I was just frustrated. But, um, won't happen.

But you went— I mean, you did the— I mean, I clearly— you bought the bottle, right? Which I really— for me, that's what I like about working with you. I feel like you got it done and you're creative, which I don't know if brokers would go the extra mile.

Yeah, and we covered the cost of the appraisal because I was so embarrassed for the appraiser.

So, um, you got to do your job right, that's the key. Yeah, that seems like just like— yeah, maybe not doing your right research because rents are— I mean, for anyone— we have a, you know, an audience that's all over, but Portland, they're very high. I mean, that's the benefit of this market, not so much.

Rates are high and they're gonna get— I mean, I was reading, I mean, I think rents are even going to go continue to go up. I mean But in the odd part right now is even with rents so high, they're still— it's still less expensive to rent than it is to have a mortgage on that property. So I think it's going to start catching up and these rents are going to continue, I don't know, hopefully going higher for everybody listening to this and for people that own properties, you know, right?

I mean, we take a lot of risk on, so, you know, and plus maintaining property, I mean, you need to charge that that, you know, to make sure you're taking good care of it. Um, so someone was asking, is DSCR a permanent loan? I mean, I think it depends on your strategy, right? It doesn't— it could be, it doesn't have to be, right? It's kind of just—

yeah, I mean, obviously, uh, it's, it's 30-year AMM, so, you know, it's 10-year interest only if you do the interest only. So then you're going to have a 20-year fixed after that. So, uh, you know, it can be a permanent if you don't want to do anything with it. I'd say most of the time right now where we're at on interest rates, you're probably not going to be a permanent loan anywhere. I think most people are going to refinance in the next coming years just because rates are so high and you're going to want to reduce that payment or get a one that you're paying off monthly instead of an interest-only, whatever it is. But yeah, you can definitely keep it forever. You don't have to do anything, but, um, I think there's going to be some serious advantages to refinancing. I hope there are coming up because— yeah, yeah, there will be.

Yeah, but just to clarify, and you can make a principal payments, right? You're not— how you penalized for that? No, right?

Absolutely. You can make principal payments, you can do whatever you want. There, like, there is