Want to Borrow Millions of Dollars? MUST Understand: Compensating Factors, Make Sense Lender, etc

Video Closed Captioning:

good morning good afternoon good evening

folks michael zuber one rental at a time

back with this friday expert mr stephen

dao how are you

i’m fantastic yourself awesome man one

of the things we do on this channel

is we bring on experts thank you again

for being a

consistent guest on fridays uh but also

we educate so one of the things i want

to do here is we’re going to take three

pieces of vocabulary that is very

comfortable for you that has become

comfortable for me but we’re going to

get a chance to kind of break it down

for folks but before we do that

do that marketing thing i don’t want to

get in trouble thank you

although again i work very happily for

velocity mortgage capital all the ideas

and topics discussed on this channel

that of my own so let’s get it finished

there you go buddy so the three pieces

of vocabulary we’re going to talk about

the first one is something that in the

mortgage industry is called compensating

factors so once you break that down as

the professional and then i’ll share my

non-professional opinion

well um

in our world um not every deal is cookie

cutter right i mean exactly the same

fits a box um that’s why they come to us

uh because after you know being denied

with conventional and you know other

challenges due to how you you know file

your income things of that nature um in

many cases there are certain

deficiencies as far as your overall

profile to be able to get conventional

financing so in our world uh the term

compensating factors can mean so many

different things to offset some of those

deficiencies to allow us to then do the

deal still as an exception even though

it doesn’t fit our normal guidelines so

for example

um if you’re

you know um

dcr is a little bit on the higher side

let’s not use acronyms dcr is

right debt coverage ratio so that’s the

term uh where you’re comparing the net

operating income of the subject property

to that of the mortgage payment so

there’s a certain ratio that you have to

kind of meet um and if the probably


you know garning it enough in in rent to

kind of meet that uh uh

ratio we can sometimes offset that or

overlook that if you’ve got you know

good fico scores or if you’ve got you

know a certain amount of reserves


number of months of p-i-t-i uh monthly

mortgage payments uh in reserves for at

least you know three to six months then

we could offset that and say that that’s

a compensating factor because if

anything should happen you got about

three to six months of you know kind of

a buffer to try to rectify it or have

that at least amount of assets to pay

somebody to fix it so things of that

nature to offset that deficiency so

compensating factors can mean so many

different things and um so that’s what

helps us to be a make sense lender

because again if you’re in the

conventional side

a computer is not going to look at that

they’re just going to see either you fit

the ltv your ratios are at a certain

amount how long you’ve been on the job

um and yeah uh and full documents tax

returns and everything else so yeah and

that aspect the top saving factors

really helped us to yeah this is this is

what it is to me and again you’re the

professional i’m not

so in my in my simple mind right there’s

a base rate right whatever it is 4 5 12

whatever it is and then what happens is

the deal right the the package that

you’re evaluating which is the person

and the asset and the plan

right and plan slash experience i think

there’s kind of in my world there’s like

three things right the person right what

is their credit score is their income


right so and again the beauty of a

compensating factor is it could be a

plus or a minus on the best base rate

maybe you have a perfect credit score

never did this and you use credit well

so maybe the base rate goes down right

right or you

you know you don’t have credit and it

goes up correct then there’s kind of the

deal right is it is it uh you know is it

do you putting 50 down or is it correct

is it a junker that needs you know

you’re paying 50 but it needs 150 and


then there’s the deal again plus or

minus and then there’s the experience of

the lender and what you’re looking to do

in the plan so the reason

i value you being a part of this channel


really the non-cum space but you you to

me right there’s there’s obviously

thousands of you out there but you’re

the only one on my channel you you would

you evaluate all three of those

right and you know some again positive

negative but that’s why people need to

email you call you

early tell you what they’re thinking

about so they know where they’re at

because you know maybe they’re calling

you hoping to get you know four percent

but again they’ve got no credit no this

no that no experience you’re like i

can’t do four it’s going to be five or

five and a half or whatever i’m not i’m

just making these up but that’s why

that’s why i think people need to

appreciate that you the building in your

experience plus or minus that’s what a

compensating factor is to me does that

make sense

it does and and it’s always worth the

conversation because if you’re finding

you know financing challenges on your

normal you know

search for for whatever it is that uh

you need but uh yeah it’s worth the

phone call because in many cases if i

can’t do it i’ll try to point you in the

right direction uh my current network

where you know either if i can’t do it i

try to just throw it over the fence

there’s no oh i know this guy let me

charge you an extra five points on top

of that so hey i can’t do it here’s who

you should call yeah just be done right

move on process well because again once

i lead them down the right path at some

point they’re going to be circling back

because it’s not if you need me but when

i agree because either you hit the

maximum limitation on conventional

financing or at some point you’re just

not gonna qualify anymore because

you know those ratios get really really

tight yeah and the lenders get tired


so at some point you’re gonna need me

either due to the scenario itself the

the condition of the property because

sometimes it’s not convinced you know i

mean it doesn’t pass the smell test in

that aspect um and so there’s so many

different uh areas that we can

accommodate financing versus your

traditional uh or conventional financer

and then as well as better terms versus

your traditional hard money lender so

that’s where the space that we’re

somewhere in between so i think that

people are starting to slowly get that

especially if all they’re exposed to is

private money or local banks yeah um for

for residential

one to four units local banks are

throwing them into commercial loans

right short-term fixed 20 25 gram even

on even on uh residential properties

yeah so we’re getting a lot of those to

call into because again short-term fix

shorter amortization we go 30-year fixed

30 or am just blowing my mind yeah all

right so here’s number two you actually

mentioned it earlier but i want to hit

it again so people know what a

sense lender is

what is that



on the conventional side you either fit

the box you meet the ratios with fico

score all these

you know industry standardized uh uh uh

uh requirements for conventional

financing um whereas with us as a mixed

sense lender sometimes even you don’t

get any of that box or even our boxes

but if it makes sense yeah we’re gonna

do it um

i don’t want to give out too much but

recently we we funded a very large

single-family uh uh

sfr no gcr meaning no debt coverage

ratio needed uh it was above six million

dollars oh wow so that’s a nice house

that’s a very nice

um that’s a good living right there

right and that was even that i believe

at a max ltv of 75 so you should know

that anything above really 2 million 3

million is never going to debt service

no of course so


at that time though that’s well beyond

our normal max as far as for residential

properties but

i believe the borrower had well over 200

million in real estate

and she had like a 780 something

fico score and i forgot how much money

in the bank but it was a lot so it was

like it was a safe loan when you when

you did all the compensating factors

together it’s like yeah we can do that

she’s never been late on anything i

think like 20 something years she’s got

over 200 million in real estate yeah you

know she just needed this fast she

didn’t want to wait anymore because the

whole you know she’s very complex as a

borrower and they promised her oh yeah

fast fast speed she paid a little bit

more in rates of course but she’s like

speed i just want the speed and yeah

yeah makes sense because it was like


what makes sense linda is me and again

i’ve experienced because i’ve done

business with velocity is

you’re not a computer model right i

think there’s a lot of things going on

in the mortgage industry which again i

think a lot of companies are going to

cut staff and get bought i think there’s

going to be a lot of consolidation in

the morning

look at what was that better.com yeah

like that crazy nice phone call from the


not a good look don’t give me ptsd

anybody else like you want to do zoom


what’s your call you know

you know

not no not a good look but again when

i’m going with this is those computer

models um they don’t have feelings right

they don’t they don’t ask questions they

don’t dig deeper it’s like oh nope

you’re out you don’t fit and they just

throw people

they’re not throwing people they’re

throwing files out

right right they say less to a very very

and i think proved eligible or not

that’s yeah i think it’s going to get

tighter and tighter

so again it makes sense lender to me as

a person it is somebody who has

experience someone that’s going to ask

questions and listen

and allah

do a deal that they normally wouldn’t do

on six million bucks in your example so

that’s what it makes since lender is so

number three and the final one i want to

talk about is asset based lending what

does that mean yes

well again um in on the conventional

world side you know to qualify a

borrower typically they’re going to look

at you know all the aspects that you

said you know credit worthiness um

uh uh income obviously as far as uh what

you get paid a month and then the asset

itself so in this case um

asset based only is you’re not going to

be too concerned about the income part

um so it’s mainly going to be based on

the asset or the or the house itself as

far as you know the the likelihood of

repayment or or things of that nature so

that’s what’s leveraged but in our case

it’s not just asset-based we’re

somewhere in between that’s what i would

say hard money or private money is

really just looking at asset based

because if god forbid you definitely

just take the property and they would

almost i don’t want to say that that’s

really what they want for you this

default but they wouldn’t mind oh there

are some predatory lenders i’ve i’ve

been involved with them uh i i know it’s

like no i don’t want to like generalize

i will i will i don’t want to i will do

that there are some lenders out there i

know them i’ve spoken with them they’re

like we expect 30 of our loans to go bad

and we get it we get real estate at a

discount that is their business month

right no that’s not we don’t want yeah

we’re not trying to be a real estate

holdings company we want our money back

uh yeah you’re just churning it yeah

recycling it or whatever the right word

right so but no as far as asset base

that’s what it basically means so if

you’re having issues you know qualifying

conventional uh things of that nature

you can go to an asset based lender

obviously expect to pay a little bit

higher interest rate but the ease of use

and and qualifying is going to be the

the determining factor but other than

that that’s pretty much what asset based

is yeah again this is my opinion not

yours uh asset-based lenders to me

are all about the asset right you know

if they get they they get

a lot of press perhaps or a lot of

thoughts because people don’t know

they’re very expensive they’re they

don’t have the compensating factors

about the borrower and experience it’s

all on the widget

that the loan is going against right um

typically the ones that i’ve seen are

very short term again they

are they are an event-based asset based

right it’s like you’re going to flip

this or you’re going to buy a dog and

burn me out

more expensive lots of rules uh skin in

the game and again what i have seen not

you what i have seen is some of them are

like 30 of these we’re gonna get we’re

gonna get on the cheap so

pretty crazy stuff dude i wanna thank

you for this you’re gonna get a lot of

phone calls this weekend uh what is your

email and how do you want people to

reach out

uh please ask doubt velocitymorris.com

in the subject line please leave the

acronym o-r-a-a-t in the body of the

email please leave a brief description

of the scenario looking to inquire about

and or maybe some general terms uh

property type uh your mid fico score

price range

desired ltv i guess um and then at the

very least not the property address the

city and state just to make sure we lend

there and then best phone number to call

you back at just to reduce the amount of

emails going back and forth so uh and

then last but not least

if for whatever reason you get stuck in

quarantine and or you slip through the

cracks and it’s been several days please

just try back again i promise you i’m


it’s just overwhelming so many emails

that i sometimes only 24 hours a day and

and there’ll be people that attest i’ve

called or tried to reach them at like 11

12 o’clock at night and that’s the only

time i can call them but it’s

unfortunately so but yeah we’re trying

my best but i’m definitely here for

everybody this has been such a great

rewarding positive uh like experience

people on this channel are awesome very

nice very patient um and and a lot of

them are you know quite knowledgeable in

the sense that they get it they hear the

message and when we do the math they’re


that’s awesome it’s just now i’m like

the third fourth and fifth series of

loans for for some of your your your uh

your people here so thanks again for the

opportunity mike no i appreciate it

you’re bringing value to this channel

you’re covering a topic i don’t know

about you are an expert on purpose

because you allow us to do some things

so folks playlist below three amazing

videos today have a wonderful time

remember i’m looking for 10 or 15 new

people to ping him this weekend s dao

that is d-a-o-s-d-a-o

velocitymortgage.com thanks bud

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