[Gustan Cho]

Did you hear the saying people who lie, deceive, steal, or hurt will get discovered and caught? It’s NOT if you are going to get caught BUT when. There is a God. A good God. Theres also Satan. A BAD SATAN that want to hurt people and all living things.

In this exclusive interview, Jimmy speaks with Senator Ron Johnson about his investigation into COVID-19 vaccine safety monitoring, focusing on allegations that federal health agencies overlooked or minimized safety signals reported through vaccine adverse event reporting systems. Johnson argues that FDA and CDC officials failed to adequately investigate reports of adverse events and criticizes what he describes as a lack of transparency regarding vaccine risks, while Jimmy contends that mainstream media and pharmaceutical industry influence discouraged scrutiny of official COVID policies.

The segment also features testimony and claims from several physicians and researchers who expressed concerns about mRNA vaccine safety, adverse events, and potential links to various health conditions, while arguing that additional research is needed. Throughout the interview, Johnson characterizes the issue as a major government accountability scandal and called for greater transparency, investigation, and public debate regarding pandemic-era health

https://youtu.be/ydkMwOp2Fhk?si=A1EPi4kn74dXFySJ

[Gustan Cho]

The department of Veterans Affairs has the most lenient agency guidelines on VA loans. The VA has a reputation of going above and beyond to help its active duty, disabled, or retired members of the United States Military qualify and get approved for a VA loan. There are no minimum credit score requirements on VA loans. There are no maximum debt-to-income ratio on VA loans as long as the borrower has sufficient residual income. The waiting period after bankruptcy, foreclosure, or other housing events is two years after the recorded date while other government-backed loans and conforming loans have waiting period after bankruptcy and significant housing event is three years to seven years. You do not have to pay outstanding collections or charge off accounts to be eligible and get approved for VA loans. VA loans do not have a cap on the maximum loan amount. The bottom line is the VA has the best mortgage loan program with the best rates and terms and lenient loan guidelines. However, from many years of experience, it is almost impossible for a borrower to get an approve/eligible on VA loans if the borrower has any 30 day late payments in the past 12 months. The team at Gustan Cho Associates has a national reputation for being able to close VA and FHA loans with credit scores down to 500 FICO. Many of our borrower do have derogatory credit tradelines, outstanding collection and charge-off accounts, late payments, repossessions, and other types of derogatory credit tradelines and in most instances, we breeze through the loan process and close VA loans in 30 days. However, one thing in common that all of lower credit score borrowers have is timely payments in the 12 months. Please take a look at the attached guide on VA loans with late payments by clicking the link. Don’t hesitate to leave a comment or call or text us. Thank you again for giving us the faith and trust with your mortgage inquiry.

Recent Late Payment VA Guidelines

gustancho.com

Recent Late Payment VA Guidelines

Recent Late Payment VA Guidelines says late payments in the past 12 months isn't always a deal killer in getting approved per AUS FINDINGS

[Gustan Cho]

Let me ask a few MLOs or wholesale reps who are more knowledgeable. Didn’t do a refinance in three years.

[Gustan Cho]

Hi Gustan,

If you’re working with clients who feel stuck between staying put and making their next move, HomeLight’s Buy Before You Sell (BBYS) paired with UWM’s 1-0 lender-paid buydown can be a powerful solution.

BBYS helps qualified homeowners purchase their next home before selling their current one, while UWM’s buydown can help ease payment concerns during the first year.

If you’d like to see how this works in action, we’re hosting HomeLight Office Hours with UWM this Thursday at 10:30am PST. It’s a live, small-group Q&A where we’ll walk through the BBYS program and answer questions in real time: Register here.

Feel free to call, text, or email me anytime, or click here to schedule a time to connect.

Thank you,

Kara Kleingarn

Lender Sales Manager

Direct (623) 526-0205

☎️ Schedule A Call With Me

[Gustan Cho]

Thanks, Danny for your input. Folks, just want to let all of you know that the mortgage process section of MLO TRAINING e-Learning Bootcamp consists of many different parts. After the module has been finished, I will try to somehow restructure it in an organized step-by-step fashion. This section consists of the general overview mortgage process. There are many sub-sections that need to get covered, which we will. Examples include, what loan program to advise borrowers, government-backed loans, conventional loans, non-QM loans, LLPAs (loan-level pricing adjustments), manual underwriting vs automated underwriting systems, third-party contract processing vs in-house processing, types of wholesale account executives, what happens if you disagree with the mortgage underwriter, and common issues during the mortgage process.

The next part of this discussion on the mortgage process relies on your knowledge of the key gatekeeping role played by the mortgage processor.

Summary of What You Described to Make Sure We are on the Same Page

• The borrower has a signed purchase contract and supporting paperwork.
• The file is assigned to a processor.
• The processor has a mission to optimize the file and submit it to the underwriter in the best possible position.
• To organize the file, the processor must ensure it has no missing pages and all required signatures, dates, and attachments.
• Any possible employment red flags, bankruptcies, other foreclosures, late payments, collection accounts, credit inquiries or disputes, and other possible employment red flags have to be explained in the file.
• The file must be submitted to the underwriter, with the best possible outcome being that the borrower has met all conditions and there are no outstanding conditions.
• Poor processing results in numerous conditions and an extended time to receive the Clear to Close, which can be very frustrating for closing.

The strongest competitive advantage in the mortgage industry is a processor who can quickly and flawlessly submit a file to the underwriter. A processor who does not excel at processing creates unnecessary friction in getting the deal done and damages relationships with real estate agents, the borrower, and even the underwriter.

Questions for You to Help Structure this Discussion:

What else do you want to discuss in detail in this area?

1. File Submission: What does a perfect submission file look like?
2. Writing a Letter of Explanation: What is the process for submitting a Letter of Explanation that is written for an underwriter and is likely to be accepted for highly unusual situations?
3. Red Flag Ranking – Learn which issues are of major concern to underwriters and how to deal with them in advance.
4. Processor–Underwriter Dynamics – Learn how to gain the level of trust with underwriters that allows them to work with your files.
5. Timeline Expectations – Understand the processing and underwriting timeframes.
6. Technology/Tools – Learn to work efficiently with modern LOS systems (Encompass, Calyx, Blend, etc.) and how systems can be leveraged by processors.
7. Next Phase – Learn what happens after the processor submits to underwriting (conditional approval review, etc. conditional approval, etc.).

I ALSO like to present a scenario, a pain point, or an example file, we can also work through this.

Let’s make this a great reference to level up processing.

This section examines real-life examples that illustrate the difference between active and careless processing methods. It also includes a detailed FAQ for processors, loan officers, and borrowers.

Case Scenarios: Processor Performance in Practice

Scenario 1: Employment Gap (Most Common)

• Eighteen months ago, the borrower faced a four-month employment gap after a layoff and company restructuring.

Mediocre Processor:

• Sends only basic pay stubs and W-2s, making the underwriter find the employment gap.
• The underwriter then requests a Letter of Explanation (LOE) and proof of unemployment benefits or a job search, delaying the file for 3 to 5 days.

Great Processor:

• Actively asks the borrower for a detailed LOE that explains the employment gap, layoff, job search, training, and recent promotion, demonstrating job security.
• Supporting documents, such as the severance letter, unemployment stubs, and new job offer, are submitted and clearly labeled in the Loan Origination System, such as LOE Employment Gap Result.
• The file usually moves through with few or no conditions because underwriters see that all concerns have already been addressed.
• Bank Deposit (Asset Sourcing Issue)

A $15,000 family gift is deposited into the borrower’s account for the down payment, flagged as a large deposit.

Mediocre Processor:

• Sends only the bank statement without showing where the money came from.
• The underwriter then asks for a gift letter and the donor’s bank statement, delaying Clear to Close by one to two weeks.

Great Processor:

• Gets a gift letter explaining the donor’s relationship and amount, confirming no repayment is needed.
• Collects the donor’s bank statement showing the withdrawal, the borrower’s deposit slip, and a short explanation letter.
• All documents are neatly organized in a subfolder named “Assets_Gift Funds_[Date].”
• Meeting these requirements regularly builds trust with the underwriter.

Result:

• The file earns a clean approval or faces only minor requirements.

Scenario 3: Previous Bankruptcy and Credit Derogatory.

Three years ago, the borrower filed for Chapter 7 bankruptcy. Some old derogatory accounts remain, along with recent credit inquiries from rate shopping. ping rates.

Mediocre:

• Sends only the basic credit report and application.
• The underwriter comes back with eight to ten requests, asking for bankruptcy details, fixes for bad accounts, and explanations for credit checks.
• The file is put on hold.

Great:

• Gets bankruptcy discharge papers and an LOE explaining the reason for bankruptcy, like medical problems, and describes steps taken to recover, supported by proof of on-time payments and no new bad marks.
• Provides proof of payment or settlement for bad accounts, or an LOE if payment is disputed or the account is small.
• Submits an LOE for all recent credit checks related to rate shopping in the last 30 to 45 days.
• Every document is clearly organized, leading to conditional approval with only one to three requests.

The borrower recently switched to a higher-paying commission-based job, though income has dipped slightly compared to last year.Mediocre:

• Sends only the latest pay stubs.
• The underwriter is concerned about income stability and requests additional documents, such as tax returns and year-to-date profit-and-loss statements, further delaying the process.

Great:

• Shows stable income by averaging the last two years or using the lower amount.
• Provides an LOE for the job change and a letter from the employer confirming income stability and future outlook.
• The underwriter sees that all two-year income documents are included.

Result:

• The file is stronger, with fewer income-related conditions.

Scenario 5: Missing Pages / Incomplete Docs

The file contains partial bank statements, a missing W-2 page, and an unsigned contract addendum.

Mediocre:

• Sends the file without fixing missing or incomplete documents.
• The underwriter quickly puts the file on hold because it is incomplete.

Great:

• Reviews every document for completeness, clarity, and signatures before sending.
• Uses a checklist and often does a pre-underwrite check, asking again for any missing items.
• Result: The file breezes through the initial review.

Key Takeaway Across Scenarios:

• Top processors stay ahead by predicting underwriter questions and following the Automated Underwriting System and guidelines.
• Their files tell a clear, complete story from the beginning.

Common FAQs on Mortgage Processing

How long does processing usually take?

• Processing takes 5-15 business days for simple files and 2-4 weeks for complex ones, like those with self-employment or credit problems.
• Highly effective processors shorten this time by gathering needed documents early.
• Speed this up by asking for documents up front.

Who Writes the Letter of Explanation (LOE)?

• The borrower must write, sign, and submit the LOE because it is a sworn statement.
• The processor helps by providing guidance or templates and ensures the LOE is clear, brief, factual, and highlights positive changes or improvements.

What Makes a Strong LOE?

• A strong LOE is short (half to one page), dated, signed, mentions the loan and specific issue, explains the main reason, and ends with the current positive situation and promises it won’t happen again.
• Supporting proof should be attached. The borrower should take responsibility without making excuses.

Can Processors Submit Files with Known Problems?

• Yes, but highly effective processors write down all known problems and include full explanations when submitting. Incomplete submissions cause delays or returns and hurt trust with underwriting teams.

What Conditions Do You See the Most from an Underwriter?

• Paystubs/bank statements.
• Current paystubs and bank statements, letters explaining gaps, bad accounts, and large deposits, employment verification, tax transcripts with gaps, and missing pages.

Loan Officers Impact the Processor’s Work?

• Loan officers should fully prepare borrowers, quickly respond to document requests, and act as a link between the sales team and processors.

Using a Standard Intake Checklist is Recommended.

What Ways Do You Think the Processors Need to be Supported?

• Processors benefit from using a Loan Origination System (LOS) like Encompass or Blend to stay organized, keeping documents labeled and sorted, and using checklists based on Fannie Mae, Freddie Mac, FHA, or VA rules.

When Does a Processor Finishes Their Job?

• The processor’s job usually ends at Clear to Close (CTC), but they may help with finishing final requirements and the closing process.

Mortgage Process Timeline From Application To Closing

gustancho.com

Mortgage Process Timeline From Application To Closing

In general, most mortgage process timeline from application to closing is normally 30 days as long as the lender has efficient operations staff.

[Gustan Cho]

As of May 26, 2026, my rough estimate is:

North Dakota + South Dakota company licensing only: about $3,000 to $6,500 if you handle most of it yourself.
With a licensing consultant: more realistically $7,000 to $14,000+ all-in for both states, depending on how much setup work they do.

This does not include payroll, LOS, compliance audits, E&O, warehouse line, accounting, registered agent, corporate formation, or ongoing compliance.

1. North Dakota Estimated Licensing Cost

For residential mortgage brokering/lending, North Dakota now uses the Residential Mortgage Lender License under NDCC Chapter 13-12. North Dakota confirms this replaced the prior Money Broker framework for residential mortgage lenders effective August 1, 2023.

Estimated North Dakota startup licensing cost:

North Dakota law states the application must include a $400 investigation fee, a $400 annual license fee, and $50 per branch location. It also requires a surety bond of not less than $50,000 and minimum net worth of $25,000.

2. South Dakota Estimated Licensing Cost

For a pure brokerage model, South Dakota uses the Mortgage Brokerage License, which applies to a company placing loans with investors for a fee and not servicing the loans.

Estimated South Dakota startup licensing cost:

South Dakota’s mortgage brokerage license fee is $500, and its MLO registration fee is $150. (Legal Information Institute) South Dakota’s bond schedule is volume-based: $25,000 bond under $25 million, $35,000 bond from $25,000,001 to $100 million, and $50,000 bond over $100 million in South Dakota mortgage volume.

3. NMLS Processing Fees

Current NMLS state licensing processing fees are:

NMLS lists these current fees directly in its processing fee schedule.

4. Consultant Cost Estimate

For a two-state mortgage company setup in North Dakota and South Dakota, I would budget:

Low-end consultant: $3,000 to $5,000
Experienced NMLS mortgage licensing consultant: $5,000 to $9,000
Full-service setup with policies, financial statement guidance, NMLS filings, deficiency responses, bond coordination, and regulator follow-up: $8,000 to $12,000+

That is consultant labor only. State fees, NMLS fees, bonds, registered agent, corporate filings, and background/credit fees are usually separate.

5. Brick-and-Mortar Requirement

North Dakota: No in-state brick-and-mortar office appears required. North Dakota’s DFI FAQ says North Dakota does not require a physical presence for the residential mortgage lender license.

South Dakota: I did not find a clear current state rule requiring an in-state brick-and-mortar office for an out-of-state mortgage brokerage. South Dakota requires a proposed business location and NMLS licensing, but the public state page does not say a physical South Dakota office is mandatory. (South Dakota Labor Department) I would still confirm this directly with the SD Division of Banking or your licensing consultant before filing.

6. Eligibility Requirements

For you individually as the MLO, you generally need:

You must have an NMLS individual account, completed SAFE education, passed the SAFE MLO test, authorized a credit report, completed fingerprints/background check, satisfy financial responsibility and character standards, complete annual CE, and be sponsored by the licensed company. CFPB SAFE Act rules require at least 20 hours of NMLS-approved pre-licensing education, including federal law, ethics, and nontraditional mortgage training.

For the company, expect:

Business entity registration/foreign qualification if needed, registered agent, NMLS company MU1, control person MU2s, ownership/management disclosures, financial statements, surety bond, company policies, AML/BSA policy, information security/cybersecurity policy, business plan, disclosure questions, and regulatory review of character, experience, financial condition, and fitness.

For North Dakota specifically, the company must maintain $25,000 minimum net worth and a $50,000 surety bond. North Dakota also prohibits a branch registration that constitutes a prohibited “net branch” or “net branching arrangement,” so the ownership/control structure must be clean.

7. Timeline Estimate

North Dakota: If your filing is clean, I would estimate 2 to 6 weeks. North Dakota says its average new MLO processing time is 1 to 14 days, depending on completeness and response time, but company licensing usually takes longer than individual MLO approval.

South Dakota: I would estimate 3 to 8 weeks for a clean company filing, possibly longer if they request additional documents, fingerprints, financials, policies, or explanations.

For both states together, a realistic planning timeline is 45 to 90 days from preparation to final approval, assuming the company entity, financials, bond, policies, and NMLS filings are ready.

8. Does Your Current Experience Help?

Yes, it helps a lot.

Because you have been a licensed MLO and branch manager in North Dakota and South Dakota for the past four years, you likely avoid the biggest delays tied to starting from scratch, such as SAFE testing, PE education, new MLO licensing, and proving basic mortgage experience. Your existing licensing history should also help with regulator comfort, assuming your record is clean.

However, it does not eliminate the company licensing review. The new company still needs its own NMLS company record, bond, financials, control person disclosures, policies, state approvals, and sponsorship setup.

Bottom Line Estimate

For North Dakota + South Dakota only, I would budget:

Do-it-yourself filing: about $3,000 to $6,500
With consultant: about $7,000 to $14,000+
More conservative cushion: $15,000 available before launching

Your existing MLO and branch manager history gives you a meaningful advantage. The main work is not your individual license. The main work is getting the new company NMLS approved, bonded, financially documented, compliant, and properly structured without triggering net-branch or control-person issues.

[Gustan Cho]

When it comes to NMLS company, branch, or individual mortgage licensing, it can get really confusing and it is very difficult to understand many questions. There are many NMLS mortgage licensing consultants and a lot of them do not return you inquiry right away. However, on NMLS mortgage licensing I highly recommend is Steven, the owner and President of Integrity Mortgage Licensing. When I was sponsored by my previous employer, Loan Cabin, Inc., Integrity Mortgage Licensing was the company’s NMLS mortgage licensing consultant. I had nothing but phenomenal experience with Steve and his staff at Integrity Mortgage Licensing. Plus, I highly recommend Integrity Mortgage Licensing’s website. The website is very informative, user-friendly, and easy to navigate. Most questions you have should be on their website. However, if you need to get a hold of someone, you can call them and if they do not answer, they will return your call promptly. Attached is the link to Integrity Mortgage Licensing.

Integrity Mortgage Licensing – State Mortgage License Service

integritymortgagelicensing.com

Integrity Mortgage Licensing - State Mortgage License Service

Mortgage Company Licensing Services We Assist Mortgage Companies We are a State Mortgage Licensing Service We assist mortgage companies with obtaining Mortgage Broker Licensing, Mortgage Lender Licensing and Banker Licensing,

[Gustan Cho]

AI is moving faster than anyone has expected. I am seeing a great benefit with AI in the mortgage industry.

The Impact of Artificial Intelligence Technology on Workforce Dynamics in the Mortgage Sector

Artificial intelligence is now a regular feature in the mortgage and housing industry. Tools such as ChatGPT, Claude, Microsoft Copilot, Gemini, Grok, and Borrower AI are widely used at work. On GCA forums, some people are concerned that AI-driven underwriting could replace human jobs. The main questions are whether these tools will make work more productive or if mortgage workers will need to look for new roles.

The Benefits of AI in the Mortgage Industry

AI offers many benefits to the mortgage industry for those ready to adapt. Mortgage loan originators can use AI to reply to applicants more quickly, follow up more effectively, create targeted ads, share educational materials, and explain loans more clearly. However, relying only on AI means missing out on the deep knowledge that experienced loan officers have, especially with FHA, VA, USDA, conventional, and non-QM loans. People who develop advanced skills beyond basic tasks will do well, while others may find their careers slow down.

AI in Mortgage Processing

Processing, which involves many checklists, is well-suited for automation. AI can spot missing bank statement pages, review pay stubs, compare documents, organize conditions and deposits, and reduce manual data entry. Still, processors will not disappear. They will need to improve their file organization and learn more about underwriting and loan rules.

The complex will handle routine work, but complex requirements from contract to closing will require specialized processors to summarize information and expedite decision-making.

AI in Compliance and Underwriting

The core of underwriting is still human judgment. AI can identify issues, but only a skilled underwriter can assess compliance, income stability, compensating factors, and risk. Automation will make manual reviews easier, but complex cases will still need experienced professionals. During closing, AI can review documents, detect missing signatures, and support compliance by verifying dates and comparing fees. People who focus only on routine checks may be replaced, but experts in closing documents, buyer and title issues, funding, and compliance will still be essential.

How Real Estate Agents Can Benefit Using AI

AI supports real estate agents by helping write listing descriptions, create social media buzz, understand market data, build buyer campaigns, and make client follow-up easier. However, it cannot build relationships, negotiate deals, or offer the detailed insights and creative problem-solving needed during showings and appraisals.

Agents who use AI for marketing and education will do well, but those who rely only on basic tasks may struggle. There are risks, including data privacy, fair lending, borrower communication, and too much reliance on automation.

Companies need to protect borrower information and use AI tools with care. The future will favor professionals who combine AI’s advantages with strong ethics and people skills. While AI can streamline paperwork, marketing, and organization, it cannot replace the knowledge needed for complex loans, helping borrowers, handling underwriting challenges, building referrals, and guiding clients. All GCA Forum members can benefit from these ideas. AI should be used carefully, not feared or ignored. Professionals should try out and thoughtfully review AI tools. Human judgment should always be at the center. Those who embrace technology will move ahead, while others may fall behind.

AI in the Mortgage Industry: Will AI Help or Hurt MLOs

gustancho.com

AI in the Mortgage Industry: Will AI Help or Hurt MLOs

Learn how AI in the mortgage industry creates new challenges for MLOs, processors, underwriters, realtors, and mortgage companies.

[Gustan Cho]

It was great talking with you this afternoon. I’m glad to hear you and your family are doing well. If you don’t mind, let’s discuss potential possibilities and/or options as a case scenario. Exploring a HELOC or second mortgage may be an option which I know it may be short based on a guestimate of $400,000 with a $340,000 first position. A HELOC or second mortgage likely won’t be enough to fund the entire project. Let’s say that your main home is worth $400,000 and has a $340,000 mortgage, so you have $60,000 in equity, which is 15% of the home’s value.

I suggest checking exactly how much you can borrow with a HELOC or second mortgage.

Most lenders let you borrow up to 80% or 85% of your home’s value with a HELOC, so you can only use some of your equity. A few lenders go up to 90% or 95%, but that’s usually for people with great credit, high income, and low debt. For these high-limit HELOCs, you generally need a credit score of at least 700. For example, $400,000 × 90% = a maximum total debt of $360,000.

$360,000 minus your current $340,000 mortgage means you could get about $20,000 from a HELOC or second mortgage.

If you qualify for 95% combined loan-to-value (CLTV),

$400,000 times 95% gives a maximum total debt of $380,000.

$380,000 minus your current $340,000 mortgage leaves $40,000 in available borrowing power. Even with a high 90% or 95% HELOC, you’ll likely get $20,000 to $40,000 before fees. With a 660-credit score, it’s tough to get approved for a 95% loan unless you have a strong relationship with a special lender or credit union. Some, like Navy Federal, offer high-limit HELOCs, but their requirements are strict.

Financing Options

Option 1: HELOC or Second Mortgage for Down Payment Only

This option may be suitable if funds are only needed for:

• Permits
• Plans
• Engineering
• Utility connection
• Down payment toward hard money
• Cash reserves
• For the first builder, a HELOC alone probably won’t be enough for the entire construction project, since there isn’t enough equity.

A ground-up hard money construction loan is often the best way to finance new investment property builds. Hard money lenders look at your project’s size, land value, after-repair value, exit plan, and available cash, not just your credit score. These loans are short-term, backed by the property, and usually last 12 to 24 months. They are often interest-only.

Interest rates are usually between 10% and 13% or higher, depending on risk, your experience, and the market. Most lenders offer 70% to 75% of the after-repair value or 75% to 90% of the total project cost.

Here’s how construction draws work:

• Money is given before scheduled inspections.
• Most lenders require a minimum loan of $100,000 to $150,000, but some private lenders may accept smaller amounts.

For example, current investor loans might have rates of 9% to 13%, lender fees of 1% to 5%, and offer 75% of the after-repair value and loan-to-cost ratios of 85% to 90%. The exact rehab or construction funding depends on the lender and loan terms.

Possible Structure of the Hard Money Loan

If the adjacent lot is a legal parcel, the simplest way to structure the loan would be:

1. Secure financing for just the new construction.
2. Use the land value and cash as equity.
3. Secure a construction loan up to the new construction value.
4. After construction is finished and you have a certificate of occupancy and a lease, you can refinance with a DSCR rental loan.
5. A hard money lender might offer up to 75% of the after-repair value, capped at $120,000.
6. You’ll likely need to put in some of your own money before the lender releases construction funds.

You may also need upfront cash for down payments.

• Plans
• Permit Fees
• Closing Costs
• Interest Reserve
• Contingency Reserve
• Builder Deposit
• Insurance
• Reserve for Appraisal and Inspection Fees

Another important thing to consider:

This is a good sign. The project is moving forward and could lead to more development in the future. Since the unit is on a separate parcel, it can be treated as its own investment property.

If it’s on the same parcel as your main home, a different lender would consider it an ADU, following their guidelines.

That affects:

• Permits
• Zoning
• Collaterals
• Financing
• Yield
• Refinancing

With an 85% loan-to-value on your main home, a HELOC would likely give you only $20,000 to $40,000. And with a 660-credit score, approval isn’t certain. Instead, you could use a small HELOC or second mortgage to build your cash reserves, then get a hard-money construction loan. After the project is finished, refinancing with a DSCR rental loan is a good option.

Lenders will want these details:

• Complete property address with state
• Is the site for the new house on a different parcel?
• Estimated costs for the build
• Estimated end value of the build
• Builder contract
• Amount of cash remaining for the close
• Current status of permits and zoning
• Exit strategy: Anytime between rent, sell, or refinance
• Anticipated rental income after the project is complete.

For borrowers in a similar situation, the best approach is often to use a HELOC for down payments or reserves if possible, and rely on a hard money or local construction lender for the main project financing.