We often get borrowers who lack sufficient verifiable income to qualify for competitive mortgages.
If those borrowers had large down payments (25% to 30%), we used to refer them to our Hard Money or more euphemistically our “Private Money” sources, as they require nothing but collateral and a large down payment.
But, we now fund most of our income-deficient borrowers in-house with our “Investor Advantage” product b/c it is so much cheaper than hard money.
Buyers must be “investors,” meaning they must buy investment properties only – so agents need to be sure to write the purchase contract accordingly.
For income verification purposes, the underwriter looks at the lesser of market or actual rents and calculate a “Debt Service Coverage Ratio” (Rent/Total Housing Payment).
If buyers are first-time investors they have to put down 30%. If buyers are experienced investors, they can put down 25% or even 20% – IF their DSCR is under 1.15.
Buyers can get 3/1, 5/1 or 10/1 ARMs, with most buyers opting for 5/1 ARMs in the 6% to 7% range, at a cost of about two points (depending on credit, down payment, debt service coverage ratio, etc.).
This is nowhere near as cheap as our most competitive mortgages that require income documentation, but it is far cheaper than hard money.
Jay Voorhees
Founder/Broker | JVM Lending
(855) 855-4491 | DRE# 01524255, NMLS# 335646
