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

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• 1:47Speaker 04

  Jumbo mortgages, what's that?

• 1:51Speaker 05

  I love it. So jumbo mortgages, right? So typically when we're looking at jumbo mortgages, these are loan amounts above what Fannie Mae, Freddie Mac will purchase from a lender, right? So, and loan limits are about to go up anyway. There's a couple lenders that's already, you know, increased their loan limits for 2025. So, you know, a single family in 2025, Fannie Mae will go up to 800 and 2,000. It's not official yet, but several lenders have already put it out there because we anticipate that they will in November raise the loan limits again.

• 2:36Speaker 05

  So any loan amount that is, that exceeds the threshold that Fannie Mae and Freddie Mac will buy, right? And so these loans are typically portfolio loans because the government is not backing them. So the lender is lending pretty much their own money on this one. So the requirements to get qualified for this jumbo mortgage is gonna be, it's gonna be a lot tougher, especially if you're going full documentation. Full documentation, ladies and gentlemen, is when you're providing your W2s, pay stubs, bank statements, tax returns. That's a full documentation loan. So your debt to income ratio will have to be, you know, 43% or below.

• 3:19Speaker 05

  And some jumbo lenders wanna see you 40% or below. You know, and you can get loan amounts three, up to 3 million, 4 million, 5 million, just depending on that lender. So, you know, this is when you're trying to buy that mega mansion, that big old dream house of yours, you're gonna use a jumbo mortgage. Now, if you are self-employed and you're looking to buy your mega mansion or your dream home that maybe costs you $2 million, $2.5 million, and you don't file your taxes properly and you write off everything, no worry. There are loans out there that can help you without providing all this information, like bank statement loans, where we're using the deposits that you're receiving

• 4:04Speaker 05

  in your business bank statements over a 12-month period. And the lender will average that out and determine how much income that you're bringing in based off of those deposits, and we can use that to qualify you. This loan is extremely popular amongst entrepreneurs who take full advantage of the tax code. This is gonna come at a much higher interest rate than what a paper, full documentation jumbo loan is gonna get. But it's well worth it to pay that 2% margin higher, 2.5% margin higher rate than paying probably a couple hundred thousand in taxes, right? So again, that's when you need to mortgage plan if you are self-employed

• 4:48Speaker 05

  and you're looking to buy this luxury home. You need to have a mortgage plan in place so you know, you can weigh out all the pros and cons ahead of time. But there are definitely options out there for all buyers in this jumbo market, whether you're full documentation, whether you're going non-traditional, and you wanna get that luxurious dream home of yours.

• 5:12Speaker 03

  So just really quick on the jumbo loan, it's usually a high interest rate. Prime example, if the interest rates are at 7, you could typically see it at 9 to 10%?

• 5:22Speaker 05

  So, so if you're doing a full documentation loan, and let's just say you're going to like a retail bank like we just mentioned. Honestly, the retail banks are gonna give you the best deal. Like a mortgage company or mortgage broker cannot compete with a retail bank like a JP Morgan because they know you got money. So if you go over there and you bring over 250,000, 300,000 deposit that, they're gonna give you a great, a great deal, right? So their rates right now might be in the 5s for a $2 million loan on a 30-year fix right now because they're making their own rules, so to speak, right? It's their portfolio money. Now, if you are a non-traditional buyer,

• 6:07Speaker 05

  then that rate today might be somewhere around 7.5% to 8% on this, you know, type of paper. If you're doing non-traditional financing, like bank statement loans, light doc loans, P and L loans, you know, things of that nature where you're not showing traditional documentation, you're gonna pay a premium for it, right? But you're gonna get into the house. And that's most important for these self-employed borrowers because they can afford that payment if they're buying at that level. They're not really too concerned about that payment shot because they'd rather have a payment that's 500 or $1,000 higher, so that way they don't have to pay 100,000, 200,000 in taxes. So it balances itself out.

• 6:51Speaker 05

  So the interest rate is important, but it's not as equally as important in looking at the full spectrum from a holistic point of view of where you stand.

• 7:02Speaker 03

  Appreciate it.

• 7:02Speaker 04

  So, all right, so let's get into this investing before we leave. So now let's talk about the other, what was it?

• 7:09Speaker 03

  It was the DSCR loan.

• 7:12Speaker 05

  Yeah, so the DSCR loan. So the DSCR loan stands for Debt Service Coverage Ratio. So, commercial loans, commercial loans. So, all right, let me start off like this. So in residential, we have DTI, right? Your debt to income ratio. When you're dealing with commercial lending, we have DSCR, Debt Service Coverage Ratio. That is the DTI of the property, right? Now, lenders have now started allowing, over the past couple of years, investors who wanna buy residential real estate

• 7:52Speaker 05

  use the same formula and calculation to how we underwrite investment commercial properties. We can now use it in the residential investment space as well, right? So when you're looking to do a true investment property, now this is when you use your LLC, okay? We're not looking at your W2s, your tax returns, your pay stubs. We don't wanna know where your large deposits came from. All of that stuff is irrelevant. The only thing the lender's really gonna do from your personal side is run your credit to make sure your credit is above a 620 credit score, right? And as long as you're above a 620 credit score, depending on how big the deal is, in most cases, you should be okay.

• 8:35Speaker 05

  Now, we're looking at the property itself when we're looking at DSCRs. So the bottom line is, is the property cash flowing? If the property is cash flowing, then the lender will lend on this property. So when you're looking at an investment property, you need to know.

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  They don't realize smart people use smartphones, huh? Seeing through BS they thought was gonna slide. Download Text Now because it cuts out clownery. You can literally activate it from your couch. Nationwide 5G with the same towers the other companies use. Pay what you want or not at all. You're in control. Show these ridiculous carriers we ain't paying for stupid because we're way too smart to pay them.

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• 12:13Speaker 03

  earners, what's up? Look, building wealth isn't just about making money. It's about knowing where your money is working for you. That's why we partner with Empower. Empower is all about helping you invest well so you can go out and live a little. Their free Empower Personal Dashboard gives you a complete view of your financial life in one place. Track your net worth, monitor your budget, analyze your investments, set retirement goals, and more. You've worked hard for your money. Now make sure it's working hard for you. Download the Empower Personal Dashboard or visit empower.com. Not an Empower client, paid, or sponsored.

• 12:50Speaker 05

  So how to analyze that property, underwrite it, not just as an investor, but also from a funding perspective? Because we need to know what your operating costs are, what are the expenses of the property, right? We already know property taxes and insurance, but what other expenses are there? Do you have to pay for, you know, your utilities? Do you have to pay the light bill, the gas, the water, the sewage, right? What is all these expenses? And then also, we're going to look at property management, right? How much is that percentage? Then you have to save for your capex expenses, which is your capital expenditures if anything breaks, right? We're gonna put all of this into a

• 13:33Speaker 05

  calculator to see exactly what those expenses come up, and then also what's the gross income? So at the bottom line is we're looking at, to make a long story short and to put this all in layman's terms because I don't want to go in nobody's head, we want to make sure that the property is paying for itself and the owners of that LLC are making at least a 20% profit after all the expenses. That is a 1.2 debt DSCR ratio that the lender's looking for. And if it does meet this requirement, then the lender will lend on that property, right? So lenders, and let's be, I'm gonna be very clear right now. It is much easier to get approved and get funding for investment properties than it is for your first home.

• 14:19Speaker 05

  Much easier. There's not as much paperwork. There's not a lot of hassle with it. As long as you know how to present the numbers to the lender properly and not over-exaggerating them to try to make the deal work, because we're gonna do our own due diligence. And if that deal cash flows and a cash flows property, it is going to close. Now typically when you're doing a DSCR loan, this is gonna require at a very minimum, a minimum down payment of 20% if it meets the DSCR requirement of 1.20%. If it doesn't meet that requirement, then the lender will require you to put more money down. So this type of loan is strictly

• 15:01Speaker 05

  for live men, not for freshmen. If you ain't got the money, say hell no.

• 15:07Speaker 03

  They gonna want their money rain asleep.

• 15:09Speaker 05

  Free hell.

• 15:10Speaker 03

  No, that's a fact.

• 15:12Speaker 04

  No, rest in peace.

• 15:13Speaker 03

  All these rules, man.

• 15:15Speaker 04

  It's a biggie. Um, okay. Refinancing? Want to talk about that?

• 15:20Speaker 05

  Yeah, I mean, we could, we could talk, we could talk about that, or we can, you want to take some questions about this? I saw a thousand and one questions.

• 15:28Speaker 03

  Yeah, I mean, you saw some, if you want, yeah, go ahead, man.

• 15:32Speaker 05

  All right.

• 15:33Speaker 04

  Questions, please.

• 15:34Speaker 05

  So I already, so somebody asked, Rashida says the minimum down payment of 20%. Yes, it's 20%. And I want to be clear again on that. Only if it meets the 1.2 DSCR requirement. So just because the minimum down payment is there, it doesn't mean that that property will cash flow out of it, right? So you might have to put 25%. You might have to put 30%. Whatever it takes to get that property to DSCR and the cash flow, then you have to do it. Now, another thing I want to talk about DSCR, because I saw this question come up earlier, is about the LLC. The LLC does not have to be established for two years.

• 16:19Speaker 05

  The LLC does not need business credit. The LLC could be a brand-new LLC. You could open up the LLC on Monday and get into a contract on Friday with that brand-new LLC, okay? Let's be very clear. It could be a brand-new LLC because lenders know investors will, will use multiple different LLCs for, for each investment property they buy. So you have to understand that, that you do not need a status business credit. It doesn't need to be something that's been in the long standard because I get that question all the time. So I just want to throw that out there real quick. Um, what else? You said something about refinancing, right, Shawty?

• 17:05Speaker 03

  Yeah, real quick, before we go to refinance, this, somebody was asking, is there a difference between this and a hard money loan? Because it sounds like the similarities, can we draw a similar, a difference there? Yeah, go ahead.

• 17:20Speaker 05

  It's a big, it's a big difference. It's nothing, it's, it's separate and apart from hard money, right? Hard money is one thing, DSCR is one thing, right? DSCR loans doesn't have rehab money attached to it. The DSCR loan is for rental, stable rental properties. It's not for rehab. When you want to buy a rehab and you do your birth strategy, right? Buy, renovate, refinance, rent, repeat, right? The DSCR, the DSCR loan is used to refinance out of your hard money loan. The hard money loan, and again, that's different formulas

• 17:59Speaker 05

  and calculations. Some, you need to be at 65, 70% max ARV. ARV is your after renovated value, but you know, I would recommend if you can get 55, 60% ARV on your, on your hard money deal, it's gonna make it easier for you to exit out of that hard money and go into your refinance. Because when you're doing a refinance on a DSCR loan, your loan to value, your loan to value, your LTV drops to 70%. In some cases, maybe 75% LTV, but most, you, most of the time I tell my people, my mantra is use 70% ARV because you need

• 18:42Speaker 05

  to be able to, I mean, 70% as your max, period. Because if you at 75, you only have a 5% cushion to get out of that, that hard money to refinance. So if you start off at 55, 60% ARV on your, on your rehab project, now you have a 10 to 15% margin buffer that you can now refinance, maybe pull a little capital out of it too, and now go into your permanent financing with the DSCR loan. So your hard money loan is going to be used to fix, buy the property and fix it up. But remember, hard money, the terms are gonna be typically 12 months. You can get past 12 months, but then it's gonna get more expensive, which you're gonna have to pay to keep extending that hard money loan, right? But again, this

• 19:27Speaker 05

  is strictly for live men, not for freshmen. Flips, flop, every day, B. Every single day. So it's very important that you know your numbers. You know exactly what the hell you're doing, because these construction costs can add up quickly, fast, in a hurry, okay? Like, like.

• 19:48Speaker 04

  Flips, flop, every day.

• 19:50Speaker 05

  Flips, flop, every day, B.

• 19:53Speaker 03

  You said one earlier, you said like, it's definitely look-up-able.

• 19:59Speaker 05

  Everything is figure-out-able.

• 20:01Speaker 03

  Figure-out-able, that's what it was. earners, what's up? Look, every purchase is a financial decision. So it's worth asking, what am I getting out of this? If you're using the Chase Freedom Flex Card, you can maximize your cash back on things you need. Groceries and gas, cash back. Dinner, cash back on that too. More ways to earn, more ways to get rewarded. Sign up for the Chase Freedom Flex Card. Learn more at chase.com/getflex. This is a paid collaboration with Chase Freedom Flex. Cards issued by JP Morgan Chase, N.A., member FDIC. Subject to credit approval. Offer subject to change. Terms apply.

• 20:39Speaker 03

  earners, what's up? Look, building wealth isn't just about making money. It's about knowing where your money is working for you. That's why we partner with Empower. Empower is all about helping you invest well so you can go out and live a little. Their free Empower Personal Dashboard gives you a complete view of your financial life in one place. Track your net worth, monitor your budget, analyze your investments, set retirement goals, and more. You've worked hard for your money. Now make sure it's working hard for you. Download the Empower Personal Dashboard or visit empower.com. Not an Empower client, paid, or sponsored.

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