This guide covers investor cash-flow mortgage for investment properties. Gustan Cho Associates now offers investor cash-flow loan programs on investment properties. One of the requirements on investor cash-flow mortgage programs is the real estate investor owns a primary residence.
Renters who do not own a primary residence cannot qualify. The way investor cash-flow mortgage loans on investment properties work are lenders will just underwrite the subject property.
It’s based on a one-to-one mortgage/income ratio. For example, if the borrower’s mortgage payment on the subject property is $1,000, the potential income needs to be $1,000. The income can be less. However, each case scenario is based on a case-by-case basis. In the following paragraphs, we will cover investor cash-flow mortgage guidelines for investment properties.
How Investor Cash-Flow Mortgage Process Work
Borrowers’ income tax is not required. We do not underwrite the borrower. The lender only underwrites the subject property. The subject property needs to be income-producing. It is a one-to-one match. The proposed mortgage payment needs to match the potential rental income. So if the proposed PITI is $1,500 per month, the potential rental income needs to be $1,500 per month.
There is no limit on the amount of property the investor has on their portfolio like Fannie Mae’s 5 to 10 Financed Properties. Fannie Mae’s 5 to 10 Financed Property Guidelines limit the amount of property an investor can have to 10.
Our investor cash-flow mortgage program does not have such a limit. The maximum amount of property one borrower can have with the Investor Cash-Flow Loan Program is up to 5 investment properties. The maximum loan amount would cap at $2.5 million per borrower.
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How Does Investor Cash-Flow Mortgage Loans Work
An Investor Cash-Flow Mortgage is designed for real estate investors who want to purchase investment properties. This type of mortgage is structured differently from traditional mortgages. It is tailored to the unique needs of real estate investors. Here are some key features and aspects of an Investor Cash-Flow Mortgage for Investment Properties:
Rental Income Consideration
One of the primary features of an Investor Cash-Flow Mortgage is that it considers the rental income generated by the investment property. Lenders typically consider a portion of the rental income as part of the borrower’s qualifying income, which can help investors qualify for a larger loan.
Debt-Service Coverage Ratio (DSCR)
Lenders often use a Debt-Service Coverage Ratio to assess the property’s ability to generate rental income to cover the subject property’s housing payments. A DSCR of 1.0 or higher is typically required, meaning the property’s rental income should exceed the mortgage payments.
Down Payment For Investor Cash-Flow Mortgage Loans
Investors may be required to make a higher down payment than traditional mortgages. The down payment requirement depends on factors such as the investor’s creditworthiness, the type of property, and the lender’s policies.
Interest rates on Investor Cash-Flow Mortgages may be slightly higher than rates for primary residences. Lenders may charge a premium due to the perceived higher risk associated with investment properties.
The type of investment property can impact the mortgage terms. Lenders may have different guidelines for single-family homes, multi-unit, or commercial properties. Borrowers must still meet credit and income requirements to qualify for an Investor Cash-Flow Mortgage. Lenders will assess the borrower’s financial stability and creditworthiness.
Investor Cash-Flow Mortgage Lenders
Some lenders may limit the number of investment properties an individual can finance using this type of mortgage. Lenders may inquire about the investor’s plans for property management. Having a property management strategy in place can be important for approval.
Some non-QM wholesale mortgage lenders require borrowers’ cash reserves to cover unexpected expenses or periods of vacancy for the investment property.
Real estate investors must shop and compare different lenders to find the best terms and rates for an Investor Cash-Flow Mortgage. Additionally, investors should have a clear business plan for their investment properties, including an understanding of potential rental income and expenses, to present to lenders.
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Borrowers’ Eligibility Requirement
There are no income documents required on the investor cash-flow mortgage programs. The lender will only underwrite and qualify the subject property. The borrower’s debt to income ratio does not come into play. Here are the eligibility requirements and guidelines on our investor cash-flow mortgage program on investment properties:
- No personal income is used to qualify investor cash-flow mortgage loans
- All income qualification is based on the subject property cash-flow
- The borrower needs to have a minimum of three active credit tradelines seasoned for 24 months
- Gift funds are not allowed
- There is a two year waiting period after bankruptcy, foreclosure, deed in lieu of foreclosure, short-sale
- The minimum credit score of borrowers is 660 FICO
- Mortgage Rates start as low as 6.0%
- Down payment and credit scores are what determines mortgage rates
- 20% down payment and/or 80% LTV
- There are no debt-to-income ratio caps
- Must own a primary owner-occupant residence with mortgage history
- On-time payments in the past 24 months
- Types of properties eligible are single-family homes, condos, townhouses, and two to four multi-family unit properties
- No limitations on the number of properties borrowers have in their real estate portfolio
- Each loan has a loan limit of $1.5 million
- Sellers concessions up to 2% are allowed
- 7/1 ARM and 30 year fixed rate mortgages available
- Interest-only available
Please note that mortgage products and requirements can vary by lender and region, so it’s advisable to consult with a mortgage broker or financial advisor who specializes in real estate investments for the most up-to-date and relevant information for your specific situation.
Titled on Individual or Limited Liability Corporation
Our investor cash-flow mortgage program allows properties to be under Limited Liability Company’s name or individual borrower’s name. If borrowers want to be under LLC’s name, here are the guidelines: Needs to be an LLC that is solely for real estate investments. Cannot be another business like a Pizza Shop, Dry Cleaners, etc. If there are multiple members to the LLC, then all members need to be on the loan. The lowest credit profile borrower on the LLC will be used for credit qualification. Real estate investors who are interested in our investor cash-flow mortgage program, please contact us at Gustan Cho Associates at 800-900-8569. Text us for a faster response. Or email us at gcho@gustancho.com. Gustan Cho Associates is available 7 days a week, evenings, weekends, and holidays.
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