This blog will cover and discuss investor cash-flow financing for rental properties. The article covers using income from investment properties to qualify for a mortgage. The housing market is booming. Home prices have been increasing double digits the past few years with no sign of a housing price correction.

Many renters are now priced out of the market and plan on renting and not buying a home. The rental market is booming. Many investors are turning to investing in rental properties.

New loan programs, such as investor cash-flow financing for rental properties, have been launched at Gustan Cho Associates. The borrower’s debt-to-income ratio is exempt on many of our investment rental property loans. In the following paragraphs, we will discuss investor cash-flow financing for rental properties.

Investor Cash-Flow Financing for Rental Properties

After the Great Recession, some riskier mortgage lending products went AWOL. One of those was the “no ratio” product that did not consider applicants’ income when approving a loan. Today, lenders must prove that borrowers can afford a home before they approve a mortgage. Non-QM and alternative financing mortgage loan programs now allow real estate investors to qualify for a mortgage to purchase investment homes.

Find out in 5 minutes if you qualify for an investment property mortgage

Cash-Flow Financing for Investment Rental Properties

However, there are different rules for investment property and primary residences. When you buy a home, the lender ensures that your income is enough to pay your mortgage and other bills.  But when you buy rental real estate, you might not need to show your regular income.

As long as the rental income from the investment property meets the lender’s guidelines, your income doesn’t matter. Advertisements for these loans often call them “no income mortgages” or “stated income mortgages,” but they are DSCR loans. Here’s how they work.

One of the most important formulas real estate investors need to know and understand fully is the Debt Service Coverage Ratio or DSCR. DSCR stands for Total Debt Service Net Operating Income: Net income divided by total debt service. Net Income is equal to Revenue minus COE. COE stands for Certain Operating Expense. Total Debt Service is the Current Debt Obligations

DSCR Mortgage Loans

The subject property needs a 70% Loan To Value, and the DSCR is 1.00. Therefore, if the rental income of the subject rental property can cover the PITIA, the property qualifies.

Three credit tradelines that have been seasoned for at least 24 months. Fannie Mae’s 5 to 10 finance properties do not apply to non-QM loans. The borrower can own an unlimited number of financed properties.

Gustan Cho Associates also has a NO DSCR rental income property program, meaning the lender will not even look at the rents. However, the property must have an LTV lower than 70% LTV. The guarantor, which is the borrower needs a 700 credit score to qualify for a NO DSCR rental property.

Qualifying For An Investor Cash-Flow Investment Property Loan

The benefit of the investor cash-flow investment loan programs is that the borrower’s income does not matter. The lender will only use and underwrite the revenues and debt of the subject property. However, it is a recourse loan, and the borrower’s credit and experience as a real estate investor are important. This section will discuss the basic eligibility requirements for an investor cash-flow mortgage loan for real estate investors: The investor cash-flow rental property loan program is available for purchases and refinances, including cash-out refinances up to an 80% loan-to-value. The borrower’s credit score must be at least a 660 FICO for an 80% LTV investor cash-flow loan. The borrower’s credit score needs at least a 660 FICO score for a rate and term refinance. The borrower’s credit score needs at least a 640 FICO for a 70% purchase or rate and term refinance.

Borrowers with at least a 700 credit score can do a 75% cash-out refinance mortgage. The property can close under an LLC. The minimum loan amount is $100,000. The loan to value up to one million dollars is 80% LTV.

One to four-unit properties are eligible, as well as non-warrantable condominiums. The borrower must own an owner-occupant primary home—timely housing payments for the past 24 months. Four years are seasoning after bankruptcy or a housing event.

Qualifying For A Non-QM Loan During A Booming Housing Market 

Gustan Cho Associates have lending partnerships with over a dozen non-QM wholesale mortgage lenders. The above guidelines are just for one wholesale non-QM investor.

Gustan Cho Associates is a one stop lending shop. We offer commercial, business, and residential loans. We have other non-QM wholesale lenders that have different lending requirements.

To learn more about the non-QM mortgage loan programs we have available for real estate investors, please get in touch with us at gcho@gustancho.com. Or call us at 800-900-8569. Text us for a faster response. The team at Gustan Cho Associates is available seven days a week, on evenings, weekends, and holidays. Gustan Cho Associates have dozens of non-QM wholesale lenders as lending partners.