Loan Officer Training 09/10/2024 - How to Structure 5-10 Unit Property Loans

Get ready to elevate your lending game in this episode of Loan Officer Training! We’re diving deep into the art and science of structuring 5-10 unit property loans—a crucial skill for any loan officer aiming to master multi-unit financing.

Join us as we explore the strategies and best practices for crafting loan structures that work for both your clients and your business. From understanding loan terms and conditions to negotiating rates and ensuring compliance, this episode is packed with insights that will help you handle these complex transactions with confidence.

We’ll also hear from seasoned loan officers who’ll share their tips, tricks, and real-world experiences. Whether you’re new to multi-unit financing or looking to refine your expertise, this episode is your key to unlocking success in structuring 5-10 unit property loans.

Tune in and discover how to create winning loan structures that drive results and build lasting client relationships!

Join The Mortgage Calculator at https://themortgagecalculator.com/join

About The Mortgage Calculator:

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

Catch all the episodes of the Loan Officer Training Podcast at https://themortgagecalculator.com/Page/Loan-Officer-Training-Series-Podcast

Catch all the episodes of the Loan Officer Training Podcast at https://themortgagecalculator.com/Page/Loan-Officer-Training-Series-Podcast

Loan Officers for Unlimited Free Non-QM Leads & Trainings Join The Mortgage Calculator at https://themortgagecalculator.com/join

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...

Transcript

Restream recording Sep 10, 2024 • 04:03:48 PM: 0:13

All right. So welcome everyone. My name is Kyle Hiersche. I am the COO of The Mortgage Calculator joined here by our president Nick Hiersche and our CSO Jose Gonzalez. We are a lender that specializes in non QM loans and what we do every Tuesday, Wednesday, and Thursday at 12 p. m eastern now is go through our loan officer training topic here. So Jose has a presentation to talk about how to structure five to ten unit property loans. This morning we talked about these on our daily rates live show and had some rates to show for them and now we're going to talk about how to structure those loans. So I'll turn it over to you Jose, go ahead. Uh, good morning or good afternoon, everyone. Thank you for joining us for today's training on how to structure 5 to 10 unit property loans. These are one of our favorite product lines because, uh, you know, they say the niches are in the riches, right? And there's a very few originators and companies really trying to specialize in this, in this niche. Uh, we love it. It falls right in line with all of our, Okay. DSCR products, right? Our 1 to 4 unit. This is our 5 to 10 unit. We have them also for 11 to 20 units. So a lot of good products out there at the mortgage calculator. So let's jump right into it on how to structure a 5 to 10 unit property loan. First, let's get into what Actually, are we talking about when we refer to a five to ten unit property? We're talking about one property with one folio number that has multiple units, right? So it could be a five unit building six, seven, eight, nine, 10. Could be little buildings or it could actually be if it's a really big property, a really big piece of land. It could be, you know, individual structures on there that fall under the same folio number that that would be a little bit less common because typically we're going to find him as all units. Part of one structure. So not individual properties with separate folio numbers that would be under our blanket loan option. So we have two channels that that we can operate on this one. The one that we're going over this morning. Was our DSCR hybrid option that treats it like a one to four unit property? Pretty much. I'm not going to say exactly because it does have its own set of guidelines, but they follow very closely to the one to four unit property guidelines, which means that, uh, unlike commercial Conduit options, zip code and population density is not considered as part of the equation, uh, whereas in the commercial option, they will not originate the loan if the population density falls below a certain threshold. So that is key because how many times have you reached out on a property like this? Only, you know, seems a great deal. DSCR is like 2. 2, borrower's credit score is 750, low LTV. Only to be told, sorry, there's only 80, 000 people per square mile or whatever it is that they have. And it falls below the minimum and they just can't do the loan. So we have the option and the workaround for, for that. So again, the DSCR income guidelines is what really allows this program to shine, right? It's very easy to qualify. Uh, minimum 1. 0 DSCR for most options, but please note that these are, uh, non QM, uh, this is a non QM product and all guidelines. are specific to the investor. For most of these options, a purchase, purchases, purchases will use the lower of the current rent if occupied or the market rent on the 1007 appraisal if vacant. Refinances will use the lower of the lease or the market 1007. On the 10 0 7 of the appraisal. Now we do have options that allow for short term rental income to be used to calculate the DSCR, which is very unique, uh, for could be STR remedy reports, air DNA on purchases and refinances or bank statements, evidencing the short rental deposits. Now, please do no vacant units, even though they are allowed. Uh, get a 25 percent reduction unless they, it's actually not vacant because it's a short term rental property. Uh, some options allow for vacant units on purchases if they are rent ready. Now, please note maximum two vacant units. So if it's two to three units, it's one max vacant, four plus units, two max vacant. So what, uh, who are our eligible borrowers? Now you will note there in bold type in red, I do have foreign nationals as an option for this program, besides the usual citizens, permanent residents and non permanent residents. non permanent residents, excuse me, foreign nationals are allowed for this program. Now they do have to be experienced investors only with either one year's ownership or small multi family management experience in order to see their ownership. or experience. Now, uh, it is possible to get an exception for no experience for first time home buyers. Uh, but you know, that will be lower, most likely lower LTV and costs. Uh, please note there that IRAs, blind trusts, land trusts, and most other inter vivos revocable trusts are not permitted and neither is an entity. owning the entity, right? The final thread of ownership has to rest to an individual owning the LLC, for example, and not another LLC. And they do have to be U. S. based entities. So what type of credit and asset requirements are we talking about? Well, for the commercial option, Uh, we can go as low as 6. 50 for our hybrid option, which has easier underwriting. We can go down to 6. 60 in our max and our LTV purchase. Max 75 percent on the hybrid option and 80 percent on the commercial option. Cash out 70 percent on the hybrid option, 75 percent on the commercial option. Please note that under the commercial option, we do have a 90 percent CLTV. Scenario that is possible with 75 percent first mortgage and 15 percent seller held second with so theoretically only 10 percent down from the borrower gifts with a minimum of 5 to 10 percent borrower contribution. Depending on the option chosen. Some ask for five, some ask for ten. And reserves also vary by option chosen, but typically we're looking at three months for a loan amount up to a million, six months for loan amounts a million and one to two million, and nine months for loan amounts over two million, and three months for each additional property with a maximum. 18 months reserves. And last but not least, minimum property requirements. This is where some people, um, you know, where they're, they basically, uh, lose a trajectory here because they don't realize that there is a minimum square footage size of 400 square feet. per unit. Plus each unit must contain a full kitchen and bathroom. So another, so this means no boarding houses, right? A boarding house is a home with a bunch of bedrooms where they share a common, uh, kitchen and they may also share bathrooms. Uh, it may only be a bedroom and they may also share the living room. So boarding homes are not, uh, possible under this, uh, program. You also have to make sure that, that the appraisal, uh, notes that the current use represents the highest and best use for the property. That's a tricky one. Cannot be rural, even though, depending on the option, they do allow a lot of acreage, anywhere from 2 to 20 acres. Uh, this does not mean that they will accept properties designated as rural on the appraisal, right, when they check off the rural box. That's not going to work out. Uh, minimum C4 or Q4 property condition. Please also note for cash out seasoning, uh, for being able to use the current market value versus the purchase versus the purchase price, you need to have 12 months seasoning. The appraisal can also not, uh, state that there are any environmental issues and no excessive nor structural deferred maintenance. And last but not least, please also note that unleased units. So for example, if you're buying the property, it's a purchase, they could be vacant in that case, but please note unleased units must be in lease ready condition. This means no issues, uh, needing renovation, uh, which would then, uh, render that unit. not leaseable for the foreseeable future. So then they wouldn't even be able to use that income. So your property, uh, would not qualify. So please do note all of these, uh, items that we mentioned were there five to 10 unit, uh, property. Remember, uh, the niches are in the riches. So I would totally recommend that you add this type of property. to your portfolio of lending products. All right. I don't see any questions here, but definitely great product and amazing opportunity with that hybrid product as well. So, uh, thank you everybody for tuning in. Remember we do have a new time for this, which is 12 PM Eastern every Tuesday, Wednesday, and Thursday for these loan officer trainings. So we will see you all tomorrow at 12 PM Eastern for the next episode of the loan training series with the mortgage calculator. Have a great day, everyone.