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INVESTMENT LOANS
Real estate can enhance the risk-and-return profile of an investor's portfolio, offering competitive risk-adjusted returns. In general, the real estate market is one of low volatility and is also attractive when compared with more traditional sources of income return.
Reasons to Invest in Real Estate
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Steady Cash Flow: Owning real estate is a way to boost your monthly income. Whether you invest in commercial real estate or residential, you can rent out your space to tenants. You will then receive a monthly payment in the form of rent checks.
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Great Returns: If the real estate you own increases in value over time, you can sell it for a solid profit. Remember, appreciation is not guaranteed. You must invest in the right property to see those significant returns.
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Long-Term Security: Real estate is a long-term investment, meaning you can hold it for several years as you wait for it to appreciate. At the same time, if you rent out your real estate, you can earn monthly income while you wait for your property's value to rise.
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Tax Advantages: Investing in real estate comes with tax benefits. You can deduct several expenses associated with owning an investment property, including your property taxes, mortgage interest, property management fees, insurance, ongoing maintenance costs, repairs, and the money spent marketing the property to potential renters. If you sell your property for more than you paid, the gain will not be taxed as income. Instead, it will be taxed as capital gains, which typically come with lower tax rates than income. If you invest in opportunity zones – neighborhoods that require investment – you will pay even less in capital gains.
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Diversification: Adding real estate to your investments boosts your diversification, which can protect you in times of economic turmoil. Say certain stocks are suffering because of an economic downturn. The investment properties in your portfolio might still be increasing in value, protecting you from the losses your other investments are taking.
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Passive Income: Investment properties bring much-desired passive income, which you do not have to work for it every day. Say you charge rent on a single-family or multifamily property; monthly rent checks are an example of passive income.
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Ability To Leverage Funds: When investing in real estate, you may not be able to purchase a property in full. After all, your plan to rent a single-family home might cost $200,000 or more. That is where leverage comes in. Leverage in real estate means using other people's money to purchase properties. In this case, you will take out loans from banks, mortgage lenders, or credit unions and pay them back over time, allowing you to add to your real estate holdings without spending the full amount you would need to buy them on your own.
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Protection Against Inflation: Real estate investments are considered protection against inflation. When the prices of goods and services rise, home values and rents typically increase. Investment properties, then, can provide you with rising monthly income and appreciation to help protect you financially when the costs of everything else are also rising.
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Chance To Build Capital: The big goal of real estate investing is to increase your cash, otherwise known as building capital. You will boost your wealth when you sell a property that has risen in value. The key, of course, is to invest in suitable properties that will increase in value.
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Fulfillment And Control: Owning investment properties comes with other benefits that are not financial. When you own investment real estate, you are your boss, which is fulfilling to many investors. You can also make a difference in your community by providing homes for renters or bringing businesses to commercial properties that provide much-needed services to their communities.
Loan Programs
Conventional
A conventional loan is a mortgage loan that a government agency does not back; instead, it is available and guaranteed through the private sector (Fannie Mae and Freddie Mac). Conventional loans remain far and away the most common type of mortgage. It is used mainly for Primary Residences and Investment Properties.
General characteristics to know:
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Down Payment: : The minimum down payment for an investment purchase is 20%.
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Private Mortgage Insurance: No mortgage insurance is needed because of the 20% down payment required.
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Occupancy: Investment property.
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Income: Must have income verification through Paychecks/W2s or Tax Returns (Self Employed), Awards Letters, Pensions, etc.
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Debt-to-income Ratio (DTI): The DTI compares how much the borrower owes each month to how much they earn. It's the percentage of monthly minimum debt payments divided by the gross monthly income. For Conventional loans, the DTI, including the new mortgage payment, cannot be higher than 50% of the monthly gross income.
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Credit Score: Will highly impact the Interest Rate and Mortgage Insurance Cost for those loans. It is possible to get approved for a conventional loan with a credit score as low as 620, although some lenders may look for a score of 660 or better.
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Interest Rates: Conventional Loans usually offer higher interest rates than FHA, VA, and USDA loans, but typically with lower APR (less cost to originate the loan) and can be either fixed or adjustable rates. The interest rate for this type of loan will largely depend on your credit score and overall credit history. The better the credit, the better the rate. Conventional loans remain far and away the most common type of mortgage, traditionally accounting for almost 80% of new home sales in the USA.
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Loan Limits: Conventional loan limits change every year. The loan limit goes as high as $726,200 for single-family homes in 2023. To purchase a home with a bigger loan than that, unless the property is located in a high-cost area, the borrower will need a Jumbo or Non-QM loan.
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Loan Terms: Conventional loans are typically for over 30 years, but it is possible to qualify for flexible terms, such as 10, 15, 20, and 25-year terms.
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Units: The property can be from 1 to 4 units. Loan limits and qualification criteria may vary depending on the number of units.
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Curiosity: Conventional loans are mortgages purchased by Fannie Mae and Freddie Mac. These two companies are government-sponsored enterprises (GSEs) created by Congress to provide liquidity, stability, and affordability to the U.S. housing and mortgage markets. They are responsible for buying mortgages from banks, helping them create more cash flow to continue originating and processing home loans. Both entities purchase and sell conventional loans. Although they are each backed by the federal government, the loans are not. Private lenders back conventional loans, so the borrower does not apply directly with Fannie Mae or Freddie Mac for a mortgage, but either of those companies may purchase the mortgage loan. Each entity either holds onto those mortgages as part of its portfolio or repackages them into mortgage-backed securities.
Non-QM
A Non-QM loan, or a non-qualified mortgage, allows you to qualify based on alternative methods instead of the traditional income verification required for most loans. That is the main difference between the QM and Non-QM loans. This type of mortgage does not meet the Consumer Financial Protection Bureau's (CFPB) requirements to be considered a qualified mortgage (QM Loan)
These loans are for borrowers with unique income-qualifying circumstances and possible credit issues.
Non-QM loans are the only way to make investment opportunities plausible for many potential homeowners and real estate investors.
Non-QM Mortgage Benefits
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Most of its programs do not require Tax Returns for income verification
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Greater underwriting flexibility
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Flexibility on income calculations
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Flexibility on job history requirements
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A 10% down minimum Down Payment is required for Primary Residences
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Flexibility on Credit Scores (with a higher impact on the interest rate and loan-to-value)
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No Income Loans or Stated Income Loans on investment properties
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Counting rental income (including Airbnb & VRBO)
Non-QM Mortgage Products Available
Non-QM loans tend to be flexible and adaptative accordingly to market conditions. Due to these circumstances, the Non-QM products are constantly changing and updating and coming on and off their availability.
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Bank Statement Loans
For this Non-QM program, bank statements are the only document required to verify income. Borrowers can qualify with as little as three months' bank statements; however, the most popular programs are the 12-month or 24-month bank statement loans. This loan is often a good solution for self-employed borrowers, business owners, realtors, consultants, and entrepreneurs.
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No Income Investment Loans (DSCR Loans - Debt-Service-Coverage-Ratio)
DSCR investment loans allow investors to build their real estate portfolio with fewer hiccups. The Debt-Service-Coverage-Ratio loan uses the property's rental income to qualify and does not consider the borrower's income. The ratio is calculated by dividing the property rental's annual net operating income by its total annual debt service payments. If the DSCR is 1.0 or higher, it is generally accepted by the lenders, and if it is lower than 1.0, some exceptions must be considered to qualify.
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Foreign National Loans
A foreign national loan is a type of loan designed for non-U.S. citizens who are looking to purchase a home in the United States. There is no need for a valid Social Security number, U.S. FICO score, or Individual Tax Identification Number (ITIN). To qualify, the borrower will need only a valid passport and the down payment (usually 30% of the purchase price), and the closing cost available.
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Jumbo Loans with 10% Down
While traditional jumbo loans still often require 20% down, we offer near-miss jumbo loans up to $3 million with as little as 10% down, up to a 50% debt-to-income ratio, and flexibility on credit scores. Jumbo loans with 10% down are often the ideal solution for first-time buyers who might still have large student loans and other credit debts, such as student loans or medical bills. The 10% down jumbo loan program is also suitable for high-income earners looking to invest their cash in other assets.
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ITIN Loans (Individual Taxpayer Identification Number)
An ITIN mortgage loan is a type of mortgage loan specifically designed for individuals who do not have a Social Security number. Instead, they use their Taxpayer Identification Number (ITIN) as the primary form of identification. The documentation and credit requirements vary by lender, but generally, we use Tax Returns, Profit & Loss statements, Bank Statements, or Seasoned Assets to document income.
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Interest-Only Home Loans
There are interest-only home loans on 40-year fixed loans, 30-year fixed loans, 7/1 arms, and 5/1 arms. You will only pay the interest during the first 10 years of the loan, providing significant savings over the life of the loan. However, it is essential to remember that you will not be paying down the principal balance during the interest-only period.
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Recent Credit Event Loans
Recent credit events can make it challenging to secure a loan because many lenders view them as a red flag. However, there are loan programs for borrowers with recent credit events, including foreclosure, short sale, and bankruptcy. While there are options for as little as one day out from the credit event, loan terms typically improve the longer it has been, even in a year or two.
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Commercial Rental Property Loans
There are a variety of loans built explicitly to the needs of real estate investors who want to expand their portfolio to include single-family homes, 2 to 4-unit properties, condos, townhomes, multi-use, and multifamily five or more-unit properties.
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