Investors have new options to finance investment properties. These products are called non-qualified mortgage products because they do not meet the requirements of the ability to repay rules under the Dodd Frank Act.
Option 1 is called a Debt Service Coverage Ratio Loan. Investors can finance up to 15 properties, use limited, general partnerships, or corporations. The income from the property must cover the debt service from .75% to 1.5%. This means rents divided by total monthly payment equals X. The X must equal a minimum of .75% of monthly payment; however, the higher the ratio the better. Down payments are between 15% to 30%, 660 minimum credit score, used for purchase or cash out refinance. Rents are determined by the lower of a lease or rent schedule on appraisal.
Option 2 is a No Ratio Loan, an investor will use this option if the debt service coverage ratio is less than .75. Under the No Ratio Loan income documentation is not considered.
Both options allow 1- year leases or longer except if a purchase transaction, home recently remodeled, no ratio loan. Refinance transactions can have variable short- term leases. Appraisals including rent schedule required as well as a desk top review. Both options typically have a pre-payment penalty when allowed by state law, first time investors allowed on debt service coverage ratio loan, and borrowers may need to meet reserve requirements.
For more information contact Stuart Peisner with Paramount Residential Mortgage Group at 407-230-6510 or email@example.com.
Stuart Peisner is a licensed mortgage loan originator with over 30 years of experience. Paramount Residential Mortgage Group is a national mortgage lender closing over $1 billion in transactions each month.