Non-Qualified Loan

Finding Lenders for Your Multiple Properties

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Finding Lenders for Your Multiple Properties

If you are an investor looking to add another property to your portfolio, you may find it a headache to come up with financing for the new property. Most banks do not lend a fifth mortgage if you already have four in your portfolio. This makes it hard to get subsequent financing for your additional properties.

Investors can get financing for up to 10 properties per Fannie Mae. However, banks are wary of giving out these loans because they are too risky. But a little bit of patience and professional help can get you to the right people.

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Qualifications

The requirements for investors to get the financing needed for their multiple investment properties include:

  • own five to ten residential properties that are also financed
  • make a 25 percent down payment or 30 percent for properties with two to four units
  • a credit score of 720
  • no mortgage payments for the past 12 months
  • no bankruptcies or foreclosures within the past seven years
  • tax records for the last two years that show the properties’ rental incomes
  • six months of PITI reserves on each of the financed properties

Another option for investors to access financing for their multiple properties is through portfolio financing. It may be hard to find lenders that offer this type of financing product but it wouldn’t be hard to qualify once you find one.

If you are familiar with the workings of the real estate industry, you can work out your connections in order to find the right one. If you turn out empty, you can inquire from your local banks or find national lenders through a broker. A non qualified loan may also be a resort for investors who have problems with their qualifications.

Finding financing for your multiple properties may be hard but it is not impossible. Begin your search here.

What are the Types of Non-QM Mortgages Available Today?

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Mortgages today are classified into two categories: qualified, and non-qualified. Qualified mortgages are designed to cater to individuals who can fully demonstrate their ability to pay back a loan. But a significant part of the American population does not fall within this category. Most businessmen or self-employed individuals, as well as freelancers or those who do not receive a steady stream of income may find it hard to qualify. This is where non-qualified mortgages come in handy.

Non-qualified mortgages (Non-QM) come in different forms, and target a different segment of the housing market. Let’s look into its variety.

Interest Only Non-Qualified Mortgage Products

With interest-only loans, you pay only the interest on the loan for a specified period. After this period expires, you are then liable to pay for the interest AND the principal, which could cause your monthly payments to balloon. If you are going to take this type of loan, be sure that you are well-prepared and have money to tap into by the time the interest-only period comes to an end.

Investment Property Loans

Investment properties are treated by the housing industry as business. Hence, loans for these properties do not have to abide by the rules set by the Dodd-Frank Act. This secures the variety of the type of financing an investor or borrower can get. Different lenders may have different sets of qualification guidelines for potential borrowers.

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Loans for High Net Worth Borrowers

Banks offer big loans for individuals whose net worth are significantly high. These individuals usually do not have a consistent income but do have a significant number of assets on their name. Thus, many banks offer loans that are based on assets rather than income. These assets must be verified (in lieu of the income) in order to qualify for the loan. These asset-based loans typically loan thousands of dollars or even millions to qualified individuals. However, borrowers must be able to maintain excellent credit and put a good percentage of the loan amount as down payment.

Non-Agency Mortgage Programs

Conventional, qualified mortgage lenders will deny your loan application if your debt-to-income ratio goes beyond the 43 percent limit. This poses a problem if you are receiving irregular income or are purchasing a property with a high loan amount. Thus comes non-agency mortgage programs to your aid. Through a non-agency mortgage, you can get around the 43 percent DTI cap and secure financing for your home. However, you must be able to demonstrate to the lender that you will be able to pay back the loan. Do not take a mortgage that is more than you can afford. Make an honest evaluation of your income and prepare to deliver.

Stated Income Loans

If you are having difficulty documenting your income, but need a home loan, you can opt for stated income loans. These types of loans target self-employed individuals. For stated-income mortgages, lenders do not look at your pay stubs and W2 forms as well as your income tax records. You just need to state your income and they take your word for it. Because of this, stated income loans are deemed risky and most of them has been eliminated especially after the housing crisis hit in 2008. However, there are still versions of stated income loans that exist. One of these are asset-verified loans. Compared to some of its predecessors, they have stricter guidelines and qualification requirements.

To get asset verified loans, your asset must be reflective of your income. Moreover, you must have money on your account that is enough to cover the loan expenses should something disrupt your income flow. Qualifications depend from one lender to another. But one thing is made sure: that you can afford to pay for the loan despite vague income records, and that you will be able to pay back what you owe.

If you are looking for financing but do not fit the traditional eligibility and qualification standards required by lenders, non-qualified mortgages could be your saving grace. However, these loans are risky and there are frauds who are always ready to pounce on the unsuspecting. When you head out shopping, make a criteria for your lender, and always be on the lookout for non-credible transactions.

Find a Non-QM lender near your area today.

Non-QM Mortgages are Great for the Self-Employed Borrowers

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Almost 10 million workers are self-employed in one form or another in the United States. This is great news for those that were unable to secure a job after the downfall of the economy. It is also good news for the economy as more money is passing through it to keep things on the up and up. The downside of self-employed workers, however, is the inability to secure a mortgage. Fannie Mae and Freddie Mac have strict guidelines in regards to self-employed borrowers. Not only do they have to provide at least 2 years’ worth of tax returns in order to use the income for qualification purposes, the income they claim on their tax returns is the only income allowed. If you are like most business owners and you take advantage of every tax advantage and write-off available (who wouldn’t?) then getting a mortgage just got even harder, unless you are looking at non-QM mortgages.

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Less than 2 Years in Self-Employment

It makes sense why Fannie and Freddie require business owners to be in business for two years. It shows consistency as well as the ability to keep your business afloat. But, if you were among the unlucky that lost your home during the housing crisis and are trying to pick up the pieces, not to mention the fact that you are finally making a good living, you want to get into a new home. This is possible with non-QM mortgages.

Just what are non-QM loans? They are loans that are not protected by the government. What this means is that borrowers have the ability to go after the lender in a lawsuit if they were to suddenly become unable to afford the loan. The only way the lender would suffer the consequences is if it could be proven that the lender did not do due diligence in determining if the borrower was able to afford the loan. Most, if not all, lenders do not just hand out loans any longer. They do not take your word for it regarding income, assets, or employment. Everything gets verified. Where they differ from any other loan, however, is that they keep most of the loans on their own books or they sell them to private investors. These individual banks or investors are willing to take the risk on those self-employed for less than 2 years. Of course, they are looking for compensating factors, such as:

  • Someone in the industry for many years before they opened their business
  • An expert working at the company that can help them stay afloat
  • A professional CPA handling the books

Something that can show that your business is legitimate and that you are in it for the long haul can help you get into a mortgage while self-employed.

Using Self-Employment Income

One of the largest downfalls of self-employment is the amount of expenses you write off. These write-offs come directly off of the amount of income you claim. In the end, this makes your debt ratio higher and your ability to get a loan much lower. If the income is lowered too much and you do not qualify for a loan, you can turn to non-QM loans. Depending on the lender, you may be able to add certain expenses back into your income, lowering your debt ratio and increasing your chances of obtaining a mortgage. Because there are no regulations on the non-QM mortgages, with the exception of ensuring that you can afford the loan, every lender has different guidelines. You will have to shop around with various lenders until you find one that will take your exact situation.

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Work on your Compensating Factors

While you are trying to determine if you will qualify for a loan, whether qualified or non-qualified, you should be working on your compensating factors. These are things that do not pertain to your income, but make your loan profile less risky. They are things like:

  • The amount of liquid assets you have on hand to help you in the event that your income does not provide enough for your mortgage payment
  • A high credit score. It is not always easy to improve your credit score, but if you know you want to shop for a home, start making sure your outstanding balances are low compared to your available credit; make your payments on time; and take care of any collections or judgements

Anything that makes your loan file look less risky is what lenders are after when trying to qualify you for a loan. Granted, there are hundreds of different programs out there that will eventually meet your needs, but if you are looking for low rates and decent terms, you will want to make your loan application as attractive as possible.

In the end, non-QM mortgages make it possible for the self-employed to be homeowners much sooner than any other loan type. If you do not want to wait until you own your business for at least 2 years and have 2 years’ of tax returns to show for it or if you know your tax returns will not show enough income, then the non-qualified loans are the best option. If you shop around within a short amount of time, you will not negatively affect your credit score, yet will have many options to choose from, allowing to you take the one with the most attractive terms.

You do not have to worry about any loan taking advantage of you, as subprime loans are a thing of the past. Non-QM loans are not subprime; they are alternative lending for borrowers that do not qualify for traditional loans. The underwriting guidelines will differ, but the need to verify every aspect of your loan will not. You will not find stated income, stated asset, or no documentation loans – you should be prepared to provide documents to cover every base to ensure the lender that you can in fact, afford the loan that you are trying to obtain.

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