If you are looking for a loan for an investment property, you have a wide variety of options. This is one of the best programs, providing top-quality financing for various properties.
As you’ll see, this is one of the top options for establishing or building your portfolio…
We have a unique product that many investors are taking advantage of to increase cashflow on an investment property. The loan has a minimum downpayment of 15% and it’s available in a 30- or 40-year fixed term with an interest-only feature for the first 10 years of the loan.
The benefit of the Interest only option is that any payment in addition to the interest due each month will be applied directly to the balance of the loan and will then automatically recast the loan balance. The result of this principle reduction and subsequent recast is a lower interest payment, as the principle balance has fallen.
A fully amortized loan, on the other hand, will not automatically recast.
At the end of the interest only period, the remaining balance is then amortized over 20 or 30 years at the same interest rate.
This product gives the investor the flexibility to increase cash-flow as rents increase over time with the security of a fixed rate mortgage as well as the opportunity to pay significantly less interest over the life of the loan if the plan is to reduce the principle.
To use this program, the limit is 75% LTV, which means you need a 25% downpayment. Also, you cannot exceed 43% for your debt-to-income ratio. This makes it one of the best options we have available for investment properties and second homes!
If your debt-to-income ratio is slightly higher, you still have options. The program allows you to go as high as 50% DTI, but the rate will be a little larger on your loan.
Altogether, however, this is an absolute home run program for investors. With only 15% down you can have an investment purchase of $2.5 million on a property with one to four units. As of the writing of this article, we know of no other program that has this option.
Considering that all other investors want 25% down on properties of three or four units (or more with a jumbo loan), and very few banks will allow for 40 years on the loan terms, this makes the program not only a great option for investment properties, but also a unique choice that is available with few other lenders.
There is also an 80% loan-to-value cash-out refinance on investment properties up to $2.5 million, which is also available for properties with as many as four units.
This program gives you plenty of options so you can select the exact loan to suit your needs. For example, you can use the program for a 30-year loan or a 40-year loan, which allows you to lower the payments if monthly cashflow is a concern. You can also select an interest-only program for the first ten years of the loan.
If the loan is Prime A+, you will need full documentation or alternate documentation of 24 months of bank statements, or 12 months of bank statements and one year of tax returns. There is also foreclosure seasoning for A+ for four years.
To use this program, you will need a credit score of 680. While this may eliminate a few potential borrowers, 680 is not an overly strict credit score, and many borrowers will meet this requirement.
With this loan, we can exclude PITI (Principle, Interest, Taxes, Insurance) from the departing residence without listing or renting the property. This once again increase your chances of obtaining the loan you need.
If using the loan to purchase an investment property that will be rented, you will need to complete a rent survey, which is conducted by a qualified professional. There is no need for lease agreements or deposits on this loan product.
If the information is filled on the taxes, a short-term rental 2-year history is acceptable.
One of the biggest challenges you will face is the income to qualify. The program will use two years of federal tax returns or one year of tax returns and bank statements. We can use income that will consider investment properties that you already own and use this as your income to qualify.
You can use this income to qualify without tax returns, but you will have to be the sole owner of the property in question.
The utilization of financial assets will be considered to help you qualify for these loans. These assets can be combined with other sources of income, such as Social Security payments, rent from other properties, and pensions, as well as a W2 income.
This program provides a wide variety of options, but there are limitations. First of all, cash-out refinancing is not allowed. Cash-out refinancing allows you to take advantage of equity in your home and turn it into liquid cash. This can be a good choice for property owners who want to update their homes or expand their current portfolio, but it is not an option with this program.
Likewise, you cannot use gift funds for this program. Basically, if someone give you a financial gift, you cannot use these funds for the downpayment. Lenders like to see that you earned the money being used, as it shows your overall ability to maintain financial responsibility. For this reason, cash gifts are not allowed as part of the program.
If you have an issue generating enough of a downpayment for this program, you have the option of using business funds if you (the borrower) are the complete owner of the business (you own 100% of the business). If you do not own 100% percent of the business, you still have options. In this case, you can have a CPA or third-party letter created to verify that you have access to the funds and that they are not an advancement on future earnings or cash distributions. All of the funds are seasoned for 60 days. There is also a requirement for documentation. In this case, you will need either a CPA letter (or similar third-party letter), a cash-flow analysis, or three months of bank statements, which should demonstrate balances greater than the funds being used for the transaction.
One of the most unique aspects of this program is that you can use it to purchase a non-warrantable condo. Essentially, “non-warrantable” means a condo mortgage that would not be eligible for purchasing by Fannie Mae. If a condo is non-warrantable, it simply means you will have more difficulty finding financing. But there are situations when getting a loan for these transactions is possible. There are still restrictions on properties, but you will likely find that some condos that would not be available for loans are eligible with this program.
With this program, you can increase your investment portfolio and create a brighter financial future. There are a lot of details that we can’t cover in a single article, so contact our team today to learn more about how you can take advantage of this amazing opportunity!
I hope you enjoyed reading this article. It’s my goal to keep you updated with the latest real estate mortgage news. I’m proud to provide you with 100% original and unique content. Subscribe now to get high quality real estate mortgage content and articles delivered directly to your inbox. Chad Baker is Regional Manager for LendUS. Chad is consistently recognized in the top 1% of mortgage originators in the United States 2011-2017. Got a question for Chad? Call (858) 353-8331 or submit your question online