Daily Mortgage Rates LIVE - 09/30/2024 - Short-Term Rental Property Loans

In this episode of Daily Mortgage Rates LIVE!, we’re diving deep into the world of short-term rental property loans. With the rise of platforms like Airbnb and VRBO, investing in short-term rentals has never been more enticing—but how do you secure the right financing? Join us as we unpack everything you need to know about short-term rental property loans, from understanding different financing options to identifying the best lenders for your unique situation.

Plus, we’ll break down current mortgage rates and trends to help you make informed decisions. Don’t miss this opportunity to learn how to maximize your investment and avoid common pitfalls. Tune in for an episode packed with expert advice, real-life success stories, and the information you need to turn your short-term rental dreams into reality!

For more episodes visit: https://themortgagecalculator.com/Page/Daily-Mortgage-Rates-LIVE-Video-Podcast

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 as Bank Statement Mortgages, P&L Mortgages, Asset Based Mortgage Programs, No Ratio CDFI Loan Progra

Catch all the episodes of Daily Mortgage Rates LIVE at https://themortgagecalculator.com/Page/Daily-Mortgage-Rates-LIVE-Video-Podcast

Check out all episodes of Daily Mortgage Rates LIVE at https://themortgagecalculator.com/Page/Daily-Mortgage-Rates-LIVE-Video-Podcast

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 USDA mortgages as well as access thousands of mortgage programs using Alternative Income Documentation such as Bank Statement Mortgages...

Transcript

Restream recording Sep 30, 2024 • 03:06:30 PM: 0:09

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 weekday at 11 a. m. Eastern on the show is go through our live mortgage rates for a few standard programs, and then we do a deep dive into a different loan type. Today's loan type is going to be short term rental property loans. Very popular right now. Definitely something very popular here at the mortgage calculator. So before that, we'll go ahead and look at the rates though. So Nick, if you are ready, let's go ahead and pull up today's rates and see what they look like. All right. So before I pull those up, we want to go over what we're going to look at here. We're going to compare all of the standard programs here for today. It's September 30th, just after 11 a. m. Eastern Solar standard programs have their initial rate sheets for today. And we will compare the APR. If you'd like a full breakdown and itemized loan estimate that breaks down all the fees that go into the APR, please get with our team members. They'd be happy to help you out. For the demos, we'll set up a standard scenario so we can compare the APR. We'll set up a single family home, 500, 000 purchase price, 400, 000 loan amount that corresponds to 20 percent down payment, 80 percent loan to value. And we use an estimated 760 FICO credit score and an estimated 40 percent debt to income ratio. So with those settings, let's check out today's rates. So first up, 30 year fixed conventional for a primary home. Back down below six, which is amazing. It peaked up a little bit there last week, but back down to where we like to be. Rates as low as 5. 625. Final APR, 5. 939, which is awesome. Definitely, uh, one and a half year lows, give or take, right at this level, which is amazing. And if for any reason our customer doesn't qualify for a conventional option, you typically want to quote a convention or a FHA option, which allows more leniency on credit issues and a higher debt to income ratio, but does require upfront and yearly mortgage insurance rates today for FHA 4. 875 and a final APR with all of the mortgage insurance fees 5. 829. So a touch cheaper than conventional. If our customer qualifies for both, they may consider FHA. They want to do the mortgage insurance. And our customers that need to use FHA, definitely a great option, very comparable to conventional at this time. And moving on to our VA options for eligible vets and active service members, these options are definitely the best for eligible vets and active service members. Rates today 5. 125, final APR 5. 391 with a standard funding fee. And notice if we compare to FHA and conventional, VA is always going to be the best option for eligible borrowers. And scrolling down to our final standard option here, our USDA is only eligible for properties in USDA areas, the rural areas of the country, the properties eligible. These are great options to consider. And USDA is coming in at 4. 99 today and a final APR of 5. 705 with all of the fees included. So when we compare that to FHA, if our customers shopping in those USDA areas, USDA is going to be a touch cheaper and a touch cheaper than conventional as well. So great option for those rural areas. And moving on to our non QM options. Many other banks or lenders don't have any non QM options. They only have the standard and therefore if the customer doesn't qualify, they would have to deny them. But we have 5, 000 other options. First up here are 30 year fixed non QM all stock options for a primary home. So if our borrower doesn't qualify for conventional FHA, etc. using tax returns. And standard documentation, we can switch to alternative docs, such as bank statements, 1099s, P& Ls, asset related, all kinds of options here. Bank statement option coming in today, absolutely amazing, 5. 875 rate. Final APR, 6. 193, just a touch higher than conventional. It's pretty amazing when we can switch to alternative docs. For nearly identical costs there. So great option for our borrowers that need to use all docs, definitely get out there today and we can use all docs for investment properties and tons of other options for investments as well. We'll go over. So our non QM Altdoc bank statement option 6. 5 rate final APR 6. 823. And we'll compare that here to our other investment options. First up are conventional. Remember there are no government options, so no USDA, FHA or VA, but we do have conventional. Coming in today, 6. 25 final APR, 6. 581. So beating, uh, non QM alt DOC, which is typical, but not quite beating our favorite options, our DSCR, our favorite loan programs here, stands for debt service coverage ratio. No income information needed from our borrower, no employment information needed from our borrower. Simply use the estimated rents from the appraisal to determine a DSCR ratio. The estimated rents can cover the estimated expenses. That's a DSCR ratio that is over 1, aka the property cash flows monthly, which is preferred. First up, our 3 year prepayment penalty option coming in today, 6. 125 rate, final APR 6. 438, just a touch cheaper than conventional, which is amazing. And we can add a 5 year prepayment penalty to sweeten the deal even more, rates as low as 5. 875. Final APR, 6. 156, which beats conventional option if we add the five year prepay, which is amazing. And we have our no prepayment penalty option for DSCR. Some states don't allow it and some investors, uh, request no prepayment penalty. That's not a problem. Rates as low as 6. 5, final APR, 6. 823, which is a touch above conventional for no prepay, which is typical. I would still say, uh, nearly a hundred percent of investors would prefer this program even at a higher cost. Thank you. And our final two options here, very popular request as many of our customers have a first mortgage that is lower than what we're looking at today for all the options and still want to access their equity record equity in the country. So typically the only option is, uh, the most common option is a HELOC, but that is a variable rate and much higher rates than what we can offer for our 30 year fixed second mortgage options for a primary home. Rates as low as 8. 125 to get that cash out of that primary home. Final APR, 8. 527. And we can even use these options on investment properties. HELOCs are rare for investments and these rates are much lower as well. Rates as low as 9. 25. Final APR, 9. 557 to get that cash out of an investment property. And these are non QM loans. So we have bank statement 1099, et cetera, different types of income options. Let's get into our topic for today. Definitely one of our favorite things are short term rental property loans, Airbnb properties, uh, very popular requests, especially as rates have Uh, risen over the last couple of years, uh, most of our investors have been focused on getting their returns through short term rental, uh, typically the returns are higher, so definitely a very common request for us to structure these deals. Uh, we typically use our DSCR options, but I can't select on the live pricer, a property type of short term rental. So since we can't set that on the live pricer demo, we have Jose that'll go through our specific examples. We have dozens, if not hundreds of different options for short term rentals. But they all vary slightly. So Jose, let's talk about the variations here and what we can do. And then let's look at our best options. everyone. Thank you for j mortgage rates live with Definitely short term ren segments of the market. U in line with all of our n Now the products mainly u when short term rental in Our DSCR products because of, um, all the, um, different variations in the guidelines that allow us to capture all the different types of income that would be applicable. To be able to qualify the borrower for a short term rental property. Uh, please note that the biggest issue with the short term rental properties is that there are no leases, right? No permanent leases. So that could affect the income being considered from the property. For your traditional financing. So let's get into our options here. So I could share with you all the different strategies that we have for qualifying the short term rental property. Now, the first one is using a standard type of insurance. And this is just one of the strategies that we have for qualifying. into the videos. The first one is using a standard If there's anything standard about an 85 percent LTV DSCR purchase loan, right? That's what we're using here. 15 percent down. This is for the scenario where the property qualifies using long term rent. Now, this is a purchase. So the borrower, uh, can structure the purchase, however they need to. Right. So in this case, if we do our research and we find out that the short, that the long term rent for the property qualifies at 85 percent LTV with a DSCR loan, that's the option that we would pick. And you see very good rates there. 7. 9. Nine nine is actually at par and we can buy that down all the way to 6. 749. This is 15 percent down, uh, which is the lowest down payment for an investment property. And this is using long term rent with DSCR, which is an amazing option. Now, if the, uh, long term rent does not cover at 15 percent down. Then in order to be able to use a short term rental income, we would have to lower the LTV to 80%. So it would have to be a 20 percent down loan. But this one allows us to use air DNA income, right? The only catch is our DSCR has to be at least 1. 5. But if it's a good short term rental property, uh, and you are using air DNA income, then you should hit the mark. of 1. 5. And look at those rates. Absolutely amazing. 6. 625 with a lender credit of 0. 025. And you can buy that down all the way to 5. 5%. That is our lowest rate option. And this is using AirDNA income to qualify at an 80 percent LTV. So for those properties that, um, the long term rent doesn't cover and the short term rent may not be possible to use because maybe there are no air DNA comps in the area. It could be that the seller was not using the property as a short term rental. So the seller cannot provide revenue reports for the last 12 months. Borrower says, this is a great property. I have other short term rentals, and I know that my business model can be applied to this property, Jose, and I'm going to make money. So then we would use the low ratio. We have two options here. The first one would be the low ratio DSCR, where the debt service coverage ratio is between 0. 75 and 0. 99. Using long term rent. So then all we would need here is 25 percent down payment, 75 percent LTV. And you're going to get these great rates, 7. 375 lowest cost option at par. And you can buy that down all the way to 5. 99. at a cost of 3. 475 points for our low ratio DSCR purchased 25 percent down for our short term property. Now, for those scenarios where the, uh, long term rent provides less than 0. 75 DSCR, but the borrower says, Jose, I want it. I know I can make it happen with that property. Just get me in. Well, then this is the product 25 percent down for a no ratio where the debt service coverage ratio is less than 0. 71, still great rates here. 8. 4, nine, nine lowest cost option at par. And you can buy that down all the way to 6. 9, nine, nine, at a cost of 3. 35 points. And now our last two examples are for cash out refis and I got some pretty interesting ones for you here, because we actually have a cash out refi that will allow you to use air DNA. For a property recently put into service. Now, as you all know, usually for refi, you can't use air DNA, but you know that at the mortgage calculator, we love solutions. We love options. So we do have an air DNA cash out refi option, but please know this is for a property recently put into service. Maybe it was just a recently purchased. It was a renovated, you know, furnished, uh, screw stuck. Uh, and now was just put into service and you have all the proof from the platform that you just put into service all the information that you need to provide to show that it was just put into service, then this is the one for you. 7.124 is the lowest cost option at par, and you can buy that down all the way to 6.374 at a cost of 3.1 points. Now that's for, uh, the property that does not have 12 months. of revenue reports. However, last option here, if you do have 12 months of revenue report for your refi, then as you can see, rates are better. Much better. So now we're looking for our cash out refi 6. 875 is our lowest cost option with a 0. 15 point lender credit and you can buy that down all the way to an amazingly low 5. 875 at a cost of 3. 35 for our Short term rental property cash out 75 percent LTV using the revenue reports from the last 12 months. So look to the mortgage calculator for all your short term rental property financing. Let's see here. If you have any questions, you can go ahead and put them there in the chat. It looks like we do have one question here. First question is how would you calculate long term rent on a short term rental property by using the two most recent tax returns the property was claimed on? Well, um, no, when we order the appraisal, right, we order also depending on the property type, if it's a one unit, we would order a 1007 market rent. And if it's a two to four unit, we would order the 216 income, uh, operating state. So that's going to calculate the market rent and then that is what will be used by underwriting to calculate the income for the property when you are using long term rent. Now if you're, I mean, if you're using short term rent, then it's AirDNA or Revenue Reports for the last 12 months. I don't see any other questions here, so I think we can go ahead and move on. And wrap it up though, definitely great programs there. Remember that we do this at 11 a. m. Eastern every weekday. We'll go through our live rates and then do a deep dive into a different loan type. So we'll have a new loan type for you tomorrow. We appreciate everybody tuning in and we'll see you tomorrow at 11 a. m. Eastern for the next episode of Daily Rates Live with the Mortgage Calculator.