In this article, we will cover and discuss traditional and non-prime investment property loans. What Are The Eligibility Mortgage Guidelines On Investment Property Loans? There are traditional investment property loans that must conform to Fannie Mae and Freddie Mac agency guidelines. However, most non-prime investment property loans are non-traditional investment property loans where each wholesale mortgage lender has its own lending guidelines.
No-Doc Investment Property Loans
One of the great benefits of non-prime portfolio loans is the guidelines are not set in stone. Portfolio lenders can and often make exemptions on investment property loans. There are no set mortgage guidelines for investment property loans. Investment property loans are portfolio loans. Gustan Cho Associates has launched dozens of non-QM loan programs for investment properties. Talk to Us About Your Property Loans
Top Non-QM Lenders For Investment Property Loans
Gustan Cho Associates has over 220 wholesale mortgage lenders for investment property loans. Gustan Cho NMLS 873293 has decades of experience in owning, managing, operating, and financing investment property loans. Non-QM mortgages benefit real estate investors during this booming housing market. Investment property loans are tailored to different investor needs and circumstances. In the following paragraphs, we will cover a breakdown of some common types:
Non-QM (Non-Qualified Mortgage)
These loans don’t meet the Consumer Financial Protection Bureau’s criteria for “qualified mortgages.” They might be suitable for investors who need to meet traditional lending requirements, such as self-employed individuals with fluctuating incomes or those with non-traditional assets.
DSCR (Debt-Service Coverage Ratio)
DSCR loans assess the property’s income-generating potential rather than the borrower’s income. Lenders typically look for a DSCR of 1.2 or higher, meaning the property’s income should be at least 120% of its mortgage payments. These loans are often used for commercial properties or multi-unit residential properties.
No-Doc Mortgages (No Documentation Mortgages)
No-doc mortgage loans don’t require extensive documentation of the borrower’s income, assets, or employment history. They can appeal to investors who need help providing traditional documentation but may come with higher interest rates or stricter terms. When considering non-qm and no-documentation types of loans, investors should carefully weigh the benefits and risks.
Benefits
Flexibility: Non-QM and no-doc mortgages offer flexibility for borrowers who don’t meet traditional lending criteria. Income-based assessment: DSCR loans focus on property income rather than borrower income, which can benefit investors with multiple properties. Speed: No-doc mortgages often have quicker approval processes since they require less documentation.
Risks
Higher interest rates: Non-traditional loans typically have higher interest rates to compensate for increased risk. Stricter terms: To mitigate risk, lenders may impose stricter terms, such as higher down payments or shorter loan terms. Potential for over-leverage: With stringent income verification, borrowers could over-leverage themselves, leading to financial difficulties if properties perform as expected. It’s essential for investors to thoroughly research and understand the terms and conditions of any loan before committing, as well as to consider seeking advice from financial professionals specializing in real estate investments. Additionally, investors should ensure they have a solid understanding of the property’s income potential and market dynamics to mitigate risks associated with investment property loans.
Mortgage Options on Non-QM Investment Property Loans
Gustan Cho Associates has dozens of non-QM wholesale lending partners that offer owner-occupant, second homes, and investment home financing. We even have asset depletion, bank statement mortgages, and investor cash-flow loan programs on investment properties. Investment properties can close under a Limited Liability Corporation (LLC). In this article, we will discuss and cover financing investment property loans.
Updated Non-QM Investment Property Loans
Gustan Cho Associates has new Rental Property Financing and Investment Property Loans that have not been in the marketplace since the Real Estate and Market Collapse of 2008. Rental property investors can now qualify for rental property financing and no doc investment property loans. Borrower’s debt to income ratios does not matter.
Non-QM DSCR Rental Property Mortgage Loans
There is no limit on the number of rental properties the investor has on their portfolio. Down payment requirements are 20% to 30% depending on the borrower’s credit scores. The only thing that we go by is the property itself. Property needs to cash flow. Investment Property Loans are available in all 50 states. It is really popular in Chicago, Illinois as well as larger cities in New Jersey, Pennsylvania, Kentucky, Mississippi, Florida, Washington, Virginia, Indiana, Wisconsin, California, Georgia, Alabama, Colorado, Michigan, Kansas, Ohio, Arizona, and the rest of the nation.
Types of Investment Property Loans
Individual or Single Property Loans: This loan program is based on 30-year fixed rate fully amortized mortgages. Portfolio Investment Loans are portfolio property loan programs for investors who have at least 7 plus income-producing rental units. Able to purchase multiple properties or refinance or get a line of credit or the combination of purchase/refinance/line of credit based on the equity of their investment property portfolio.
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Benefits of Non-QM Investment Property Loans
There are many reasons why the Investment Property Loan Program is different than any other commercial/investor mortgage program. This is a no-doc program where income verification is not required. It is solely underwritten based on the cash flow of the subject property. This unique program is underwritten based on the debt coverage ratio.
DSCR Investor Loans
It is not based on the individual debt-to-income ratio. Unlike Fannie Mae’s 5 to 10 Financed Properties Guidelines, there is no limit on the number of properties financed with Investment Property Loans. Again, unlike traditional Investment Conventional Loans, Rental Property Financing and Investment Property Loans can be financed directly by an LLC. It is not only restricted to individual borrowers and co-borrowers.
Single Investment Property Loans With No Income Documentation
The single investment property loan program is for both purchases and refinances. Here are the types of properties that can be financed:
- Single Family Homes
- Condominiums: Non-Warrantable Condominiums are allowed
- Townhomes
- Two to Four unit apartment buildings
The minimum property value needs to be $100,000 and the minimum loan amount is $75,000.
DSCR Loan Program Down Payment Requirements
There are down payment and loan-to-value requirements on investment property loans. The down payment and LTV requirements are based on the borrower’s credit scores. Here are the down payment requirements for Purchases and Refinances. For borrowers with 700 credit scores and higher, 20% down payment is required on purchases and 80% LTV on refinances. For borrowers with credit scores between 680 and 699, the down payment required is 25% on purchases and 75% LTV on refinances. For borrowers with credit scores between 660 and 679, the down payment requirement is 30% and 70% LTV on refinances.
Minimum DSCR Loan Credit Score Requirements
The minimum DSCR Loan credit score requirements depend on the wholesale mortgage lender. Non-QM wholesale lenders on DSCR investor loans are negotiable on credit score versus down payment requirements. Each DSCR mortgage lender has its own credit score guidelines and can make exceptions. In general, the minimum credit score to qualify for Investment Property Loans is 640 credit scores. Borrowers under 660 can contact us and Gustan Cho Associates will help them improve and boost their credit scores to a qualifying score so they can qualify for the program.
Property Debt-to-Income Ratio Requirements
This program is underwritten by the cash flow of the property and not the borrower and co-borrowers. Here is the formula of the property debt to income ratio requirements: For properties where their value is $150,000 or greater, the maximum cash flow coverage requirement is 85%. For properties where their value is less than $150,000, the maximum cash flow coverage requirement is 70%. The Cash-Flow Coverage is calculated by taking the PITIA and dividing it by the Gross Rent.
Portfolio Lines of Credit
The portfolio lines of the credit program are for investors who have at least 7 rent-producing investment units. It does not need to be 7 separate properties but rather 7 individual rent-producing units. The minimum loan amount is $700,000 and investors can purchase a combination of properties with this program. If investors cannot meet the minimum loan requirement of $700,000, they can either purchase two or more investment properties or do a purchase and/or refinance or a combination of the two to meet the minimum loan requirement.
7 Unit Guidelines to Qualify on Blanket Line of Credit
Here is an example of the 7 units:
- 7 single-family homes
- 4 duplexes
- 2 four-unit buildings
No-Doc Loans For Rental Properties
The above examples show at least 7 or more rent-producing units. This program allows investors a blanket line of credit that they can use anytime for any purpose they need. It can be used to purchase an investment property or to do rehab on their rental properties or for any personal reasons. There is no other investment loan program like this today. Investors do need at least 7 rental-producing properties with equity in order to qualify. Portfolio loans and lines of credit are for purchase and refinances or a combination of both. Investment homes do not have to be in the same state and can be located in multiple states.
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What Is a Good DSCR Loan For Rental Properties?
The following are the types of investment properties that are eligible for the portfolio loan and blanket line of credit program:
- Single-family homes
- Townhomes
- Condominiums
- Non-Warrantable Condominiums are allowed
- Two to four-unit buildings
- 5 to 20-unit apartment buildings
- The minimum per unit property value is $50,000 and the minimum portfolio loan and/or line of credit amount is $700,000
- The maximum Loan To Value is 75% LTV
- The minimum DSCR is 1.15x which is calculated by taking the NOI divided by the PI
- At least 90% of the units need to be occupied and rented
- The borrower needs to be under the name of an LLC of the borrower
- Although the borrower’s personal debt to income ratio is not required, the minimum credit score of the borrower needs to be at least 660 FICO.
- Down Payment Requirements for purchase or loan to value for refinances depend on the borrower’s credit scores
Borrowers need at least 660 for 70% LTV, 680 for 75% LTV, and at least 700 for 80% LTV.
What Kind of Loan Do You Get For an Investment Property?
Investors who are ready to get into the real estate market, whether new or seasoned, can now qualify for this special investment property mortgage program. To learn more about it, contact Gustan Cho Associates at 800-900-8569 or text for a faster response. Or email us at alex@gustancho.com. The team at Gustan Cho Associates is available 7 days a week, on evenings, weekends, and holidays to take your mortgage inquiry. Gustan Cho Associates is a mortgage company licensed in multiple states with no lender overlays on government and conventional loans. We also are experts in non-QM and alternative financing loan programs.
I have a 775 credit score and I’m looking at a property in the Houston area that will cost 125k. 3/2/2 in a good working class neighborhood. O grew up in the area so I know that with a little work the house is actually worth 165k+. How long will it take to close a no doc 30 yr and at what rate. The property meets the 70% and will cash flow about 500 month. What type of interest rate are you right now for a 30 yr investment properrty loan?
Non-QM loans require 20% down payment. Please reach out to us with your contact information so we can have a Texas licensed loan officer reach out to you at gcho@gustancho.com or call us at 262-716-8151 or text us for a faster response.
I want to get a piece of property, but I’m not sure how to afford it. It makes sense that getting a property loan could be really beneficial! That seems like a good way to ensure that I can afford it correctly. My credit is over 720. My wife’s credit is slightly below 600, approximately 590-600 depending on the reporter. We keep getting denied a VA Home Loan either from her credit, or due to my pay structure at work. Her work is steady, she is an E4 in the Army. My pay is hourly, but primarily commission and I receive housing allowance from the GI Bill. We together bring in over $6,000 a month. We need to be out of our current house by August 31st. We want to buy a new home within the next 30 days.
I’m interested in a no-doc loan, and do not provide tax returns. I have a SFD valued at approximately $100K with a loan having a maturity date of 5/1/2022. Loan balance is $22K and the property rents for $850. I obviously need a loan. Since the estimated value is so close to your minimum loan amount, can another property be added (i.e. one loan for two properties)? I’m open to consideration of other options you may offer.
We can help you. Please email us your contact information with your phone number at gcho@gustancho.com or call us at 262-716-8151. Text us for a faster response.