Drawing on extensive experience collaborating with investors...
we recognize that possessing comprehensive product knowledge and effective communication are pivotal for any investor. We’ve all experienced the frustration of being left in the dark for days or weeks due to a lender lacking positive updates. Whether it’s a failure to thoroughly assess your situation upfront or changes in their guidelines during the process, the result is a significant drain on your time and resources.
At IMS Funding, we empathize with these challenges. Whether the news is positive or not, we commit to standing by you every step of the way.
We'll do the heavy lifting, analyze your situation, and present you with the most competitive options available. You can then compare our quote with confidence, knowing you've explored a variety of choices.
Frequently Asked Questions
What questions do you have for us?
What are your rates?
It's great that you're interested in our rates! However, it's impossible to give a single, accurate answer without more information about your specific situation.
Think of it like shopping for a car - the price depends on the make, model, features, and even your credit history. Similarly, loan rates are influenced by many factors, including:
- Credit Score: A higher score generally leads to lower rates.
- Loan-to-Value (LTV): The amount you borrow compared to the property's value.
- Loan Amount: Larger loans may have different rates than smaller ones.
- Prepayment Penalties: Whether you're penalized for paying off the loan early.
- Buy Down Points: Paying upfront to reduce your interest rate.
Even with those factors, the market is constantly changing! While we've recently seen rates in the 7-8% range, those numbers can fluctuate.
Here's where IMS Funding comes in:
We have access to a wide range of lending options, both through direct funding and by brokering loans. This means we can shop around to find the best rates and terms for your unique needs.
What is a DSCR Loan?
A DSCR loan (Debt Service Coverage Ratio loan) is a type of mortgage specifically designed for investors like you! It's a great option if you're looking to finance a rental property.
Here's how it works:
Unlike traditional mortgages that focus heavily on your personal income and credit score, DSCR loans primarily consider the rental income the property is expected to generate.
The key factor is the DSCR:
This ratio compares the property's monthly rental income to its monthly mortgage payments (including principal, interest, taxes, insurance, and any HOA fees).
- Higher DSCR = Lower Risk: Lenders like to see a higher DSCR, typically 1.25 or greater, which means the property generates enough income to comfortably cover its debt obligations.
Benefits of DSCR Loans:
- Less emphasis on personal finances: Your personal income and debt-to-income ratio may not be as important.
- Qualify for more properties: You might be able to finance more rental properties than with traditional loans.
- Potentially faster approvals: The qualification process can be quicker since it focuses on the property's income.
Who are DSCR loans ideal for?
- Real estate investors: Individuals or companies looking to expand their rental property portfolios.
- Self-employed borrowers: Those whose income might be harder to document with traditional loans.
- Borrowers with high net worth: Individuals with significant assets who prefer to leverage their investments rather than their personal income.
Interested in learning more about DSCR loans?
Contact us today to discuss your investment goals and see if a DSCR loan is the right fit for you!
How is the Debt Service Coverage Ratio (DSCR) calculated?
The DSCR is a key measure of a property's ability to generate enough income to cover its debt obligations. It's used to assess the risk of a rental property investment.
Here's the simple formula:
DSCR = Monthly Rental Income / Monthly Debt Payments
Monthly debt payments typically include:
- Principal and Interest (P&I): Your loan payments.
- Property Taxes (T): This includes all applicable taxes (city, county, school, etc.).
- Insurance (I): Covers liability, casualty, rent loss, and flood insurance if required. We typically require "replacement cost" casualty insurance and rent loss insurance to ensure adequate coverage.
- Homeowners Association Dues (A): If applicable.
Important Note: Your actual monthly insurance expense might be higher than you initially expect. This could be due to our insurance requirements or if the appraised value of your property is higher than the value used for your previous insurance policy.
What's the difference between a Rate & Term Refinance and a Cash-Out Refinance?
It's easy to get these two confused, but they have distinct purposes! Here's a breakdown:
Rate & Term Refinance:
- Goal: To improve the terms of your existing mortgage. This usually means getting a lower interest rate, a shorter loan term, or both.
- Cash Back: You might receive a small amount of cash back (usually no more than $2,000 or 2% of the new loan amount), but the primary focus is on improving your loan terms.
- Example: Let's say you have a 30-year mortgage at 6% interest. With a rate & term refinance, you could potentially lower your rate to 5% or switch to a 15-year loan term.
Cash-Out Refinance:
- Goal: To access your home equity by taking out a new mortgage for more than you currently owe.
- Cash Back: You receive a significant amount of cash that can be used for various purposes (home improvements, debt consolidation, investments, etc.).
- Example: If your home is worth $300,000 and you owe $200,000, you could do a cash-out refinance for $250,000. You'd then receive $50,000 in cash (minus closing costs).
In a nutshell:
- Rate & Term: Focuses on improving your loan terms with minimal cash back.
- Cash-Out: Focuses on accessing your home equity for a larger sum of cash.