We’re excited to share news of a new, ground-breaking initiative to reduce mortgage stress for American families. Those who have investment property and are receiving money from it are the target audience for the cash flow program.
Borrowers looking to buy or refinance investment properties can take advantage of a once-in-a-lifetime opportunity with the Investor Cash Flow Program, which allows them to qualify solely on the basis of rental income from the subject property.
One of the borrowers must have managed rental properties for at least 12 months (this period need not have occurred within the past three years) in order to qualify for this program option.
Investor Cash Flow’s main selling points are:
- Only single-family homes, planned unit developments
- condominiums (warrantable and non-warrantable) with four or fewer units are eligible
- Debt-to-income (DTI) ratios are disregarded; qualifying is based on the DSCR of the subject property. Typically we must have a DSCR greater than 1.
- A property’s DSCR is determined by dividing its gross rent by its total operating expenses. Equal to the DSCR, PITIA
The first example shows a DSCR of 1.142 (acceptable) with a gross rent of $2,000 and a PITIA of $1750. Two examples of unfavorable debt service coverage ratios are provided below.
The appraiser will use the lower of the current rent or the market rent to set the rent. Lease agreements, if any, should be presented in written form.
- Income and employment are not confirmed.
- Income transactions involving cash flow are not subject to HPML or ability-to-repay standards since they are deemed “business purpose” loans.
- Gift money from a relative can be used for the down payment and closing costs, but not to cover the required reserves. When using a gift, the borrower must reduce the loan-to-value ratio by 10% or put up 5%.
- A maximum of 15 properties, including the one being financed, are permitted. For each additional property, PITIA reserves must be increased by one month, or alternatively, a percentage of the total unpaid principal balance of all mortgage loans plus the proportion of the property’s value that is owned free and clear must be set aside. For prerequisites, please consult the guidelines.
Financing for legitimate commercial purposes, such as the acquisition or refinancing of rental property
- When submitting an application, applicants must also include a fully completed Declaration of Intent to Proceed.
- Repayment Income Source:
Income from the subject property is capped at 75% for single-family homes and 90% for multi-unit buildings like condos and co-ops.
All PITI costs (including HOA dues or maintenance) on the loan must be covered by this amount. Existing leases, the RE broker’s estimate of rent, and the presence of a listing to sublease will be used to calculate the subject’s rental income.
Title to real estate must be held in a corporation, limited liability company, or partnership.
- Named Party Borrower Named Party Guarantor(s): Individuals who are or will be borrower officers or members are required.
- For the maximum loan-to-value ratio, please contact us. With a score of 700 or higher, you’ll get 65% for a purchase and 60% for a refinance. A lower LTV is typical when credit is weak. Floor: 45%.
- Get in touch with us for pricing details.
- Credit (Credit of Guarantor):
- No more than two 30-day mortgage late payments in the past 12 months, barring exceptional circumstances.
- 620 credit score required at minimum.
- The closing cannot take place without the presence of both the guarantor and an authorized officer.
- Both parties must sign the closing declaration for the rental property loan.
- The borrower’s legal counsel must be present at closing in order to sign the necessary sections of the Closing Declaration.
Take advantage of Steve Knows Loans’s Investor Cash Flow Program to unlock your real estate investment potential. To explore the possibilities and find out more about our pricing details, get in touch with us today
Call Steven Jackson at 813-616-9411 now!
