If you’re an active real estate investor, you’re probably familiar with fix-n-flip and private money loans. These short-term (typically 1-year) loans are more expensive than traditional financing through conventional lending programs. Fortunately, new capital has allowed for new and improved investment financing through alternative lending programs. Remarkably, these Real Estate Investment Loans require no income documentation and come with more favorable terms, to boot.
These stated income loans offer lower interest rates, longer financing terms and higher loan-to-value (LTV) ratios than investors typically have received with traditional private money loans.
And the best part? With those improved terms come better cash flow and more investment opportunities in the long run. It’s a win-win in every sense of the word.
The Details: Rates, Terms & Documentation
There are two options with these loans: The Rental Qualifier Loan and the No Doc Investor Property Loan.
The Rental Qualifier Loan offers simple qualification requirements. The loan amount is determined by actual rental income or a market rent survey provided by an appraiser. This amount must cover at least the new monthly mortgage payment, including principal, interest, taxes and insurance.This No Income-Lease agreement program is for single family residences and 2-4 unit properties that “cash flow.” On a purchase that has not yet been leased, the rental survey amount from the appraisal can be used to determine the rent.
The No Doc Loan is different than any other real estate investor loan program. It requires no income estimation or documentation at all No Ratio/Stated income. Your credit score determines the interest rate, loan-to-value ratio, and loan amount.
On both programs, your rate will be based on:
Loan-to-value ratio (the amount of cash you're seeking divided by the value of your property)
Total loan amount
Type of transaction (purchase, refinance)
Payment option (fully amortized, IO-Interest only)
These programs typically come in 5/1 and 7/1 adjustable-rate options, as well as 30-year fixed terms, and are available on single-family rentals, condos and 2 to 4 multi-unit buildings and non-warrantable condos.
Best Use Cases
Though some investors prefer shorter term loans, these lengthier loans can offer numerous benefits to those who use them.
They’re ideal when:
Buying a long-term rental property – Lengthier loans offer lower rates over the long term, helping ensure a healthy cash flow as you manage the property.
Fixing and flipping a property – Longer-term loans give you more time to rehabilitate the property, as well as build equity before re-selling.
Cash-out refinancing an investment property – These loans can help you maximize the cash you receive from your refinance, allowing you to purchase additional properties or renovate other projects.
If you have a hard money loan coming due, refinancing into a longer-term investment loan can also be a smart move.
Investment Property Loans and Primary Residence Loans: How Are They Different?
Conventional lenders will usually consider investment property loans to be riskier than loans for a primary residence. This is because rental income is usually needed to pay the mortgage since the homeowner won’t be residing in it. Conventional lenders will often require borrowers to secure higher down payments and maintain higher credit scores in order to qualify for rental property loans.
Ready to Get Started?
Think these longer-term loans may be a good fit for your rental investment strategy? If you’re an active real estate investor, seeking to buy a long-term rental property, fix and flip a property or cash-out and refinance an investment property, contact us to learn more about our private money loans.
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About HomeLife Mortgage
For more than 25 years, HomeLife Mortgage has built a strong reputation in California and Florida as a leading mortgage broker, servicing the needs of borrowers who have been unable to obtain conventional financing. HomeLife Mortgage is at the forefront of non-bank lending offering the next generation of mortgages including Jumbo Non-Prime Loans, Real Estate Investor Loans, Bank Statement Loans, FHA Loans and VA Loans.