Three Big Improvements to Rental Property Loans
If you are a real estate investor, you probably know that good rental property loans can be difficult to obtain.
Banks and other lenders typically see these as riskier loans so they create tighter guidelines to minimize their risk.
If you look at historical loan default and foreclosure data, it suggests that rental property loans are more likely to become delinquent when times are tough than are owner occupied property loans.
New Less Restrictive Guidelines
Even though the large banks are still very cautious to make rental property loans, there are now several large national mortgage banks with new, more flexible guidelines in the following three areas:
Higher Loan-To-Values – smaller down payments and less equity required
Until recently, to get a decent loan when purchasing a rental property, you would be required to put 25-30% down or have that amount of equity when refinancing.
New programs allow 10% down, and in some cases, less when refinancing.
Cash Out – less restrictions on LTV, amounts and use
For investors looking to take cash out of an existing rental property, now is the time. The amounts allowed and terms available are much better than in recent years.
Getting more of your equity out and a larger amount of cash is now possible.
Lower Credit Scores – required score lowered by 100 points, or more.
Just recently, new programs have been released allowing credit scores as low as 620 on rental property loans (even lower in some cases). The old credit score minimum was 720 for “prime” market loans.
Other Improvements
These new rental property loan programs also offer:
- Larger Loan Amounts – jumbo loan amounts
- Fixed Rate Options – low cost fixed rate options
- No Pre-Payment Penalties – no penalties for early pay off
If you are looking to purchase an investment property or lower your payments to improve cash flow on an existing property, consider using these new programs.
With rents on the rise, and very low interest rates, isn’t it time to maximize your returns?
We work directly with the large national wholesale banks that are offering these programs.
Are you ready to see what these new rental property loans can do for you?
Brian Bush
Office: 310-817-6410 x220 | Direct: 310-601-1997
What You Need to Know About Stated Income Loans
Stated income loans were very popular before the meltdown. Of course, as all things come and go, they are making their way back into the marketplace. Many blamed the financial crisis on lending institutions and their lack of concern and desire to document a borrower’s ability to repay a loan.
Today, stated income loans are available for investment properties, partly because these loans do not fall under the same amount of regulation as do owner-occupied residential loans.
Here are three things to note if you are considering using a stated income loan program:
1. Who is allowed to apply under a stated income program? These loans were originally intended for the self-employed who often don’t claim all of their gross earnings or have less actual business expenses than they report on their tax returns. Some stated programs will allow employed borrowers.
2. Will the amount stated as income on the application be verified? Some lenders will require a 4506T form which is a request to order a transcript from the IRS. This transcript shows the line item amounts for each schedule filed with previous year’s tax returns. The 4506T can be ordered by the lender and reviewed before funding the loan. They will look to see if the stated amount of income on the application is reasonable as compared to previous year’s tax return filings as shown on the transcript. Not all stated income loan programs require this.
3. Are bank statements allowed to determine qualifying income? Yes, these programs are a good alternative for business owners that would rather not provide their tax returns and want to avoid the risk of stating an amount of income on an application that may not be verified by an IRS transcript. Lenders will usually review the most recent consecutive 12 months of statements and determine the applicant’s personal income by calculating the gross deposits minus some percentage for expenses.
As always, be careful when applying for a stated income loan and make sure to discuss the pros and cons with your Loan Officer first.
So what are you waiting for? Are you ready to get started?
Brian Bush, Broker
Office: 310-817-6410 x220 | Direct: 310-601-1997