A debt service coverage ratio (DSCR) loan uses the cash flow from a property to qualify for a home loan rather than using income statements.
For this reason, DSCR loans are the perfect opportunity for real estate investors to grow their portfolios when they do not have sufficient historical employment information or tax returns to qualify for a home loan.
A debt service coverage ratio loan has multiple benefits. Capital Mortgage offers DSCR loans today. Take a look at some highlights, and submit a form to get started.
Bank statement loans are an excellent resource for individuals who are self-employed but are unable to document their income using tax returns.
Rather than supplying tax returns and income statements, the individual would use their average monthly deposit through bank statements to demonstrate reliable income.
Let’s take a look at some of the most frequently asked questions about Bank Statement Loans. Interested in learning more about offering Bank Statement Loans? Talk to Capital Mortgage today to learn more about how we can help.
Bank statement loans are a different type of loan than your traditional mortgage loan. Borrowers provide bank statements rather than tax returns.
Monthly deposits are averaged out and a percentage is determined as the average monthly income to be used on the loan to qualify for a mortgage.
Depending on whether the account is business or personal, 12-24 months of bank statements are required.
In the past, “stated income loans” or “no-doc loans” were easy paths for the self-employed to follow. Though after the 2008 mortgage crisis, these programs ceased to exist.
While entirely different, bank statement loans are the safest and easiest loans for self-employed borrowers as well as the lenders that serve them, alike.
This loan refers to a popular financing option given to a customer purchasing a distressed property to renovate with the express purchase of selling it. In recent years, we have seen a massive influx in more casual real estate investors have entered the market in hopes of “flipping” distressed properties.
What often happens is a distressed property is sold at auction for cash, or the seller offers a a better deal for an all-cash purchase. In this situation, the borrower needs the money for renovation, and will pull it from the 100% equity in the home, in the form of a cash-out refinance.
With real estate investment, work on the property must begin soon after closing. These tend to be private lenders that have hard money fix and flip loans with short repayment periods, which perfectly fit most flippers’ project timeframes.
Fix & Flip Lenders are also more likely to offer loans with no money down, no credit check, or to borrowers with bad credit. Some of these lenders also offer fix and flip loans that cover up to 100% of the rehab costs.
Unlike traditional mortgage loans, fix & flip loans come from private lenders who take into consideration the “big picture”—the property’s purchase price, the scope and price of the work that needs to be done, and the projected resale value of your property post-flip. It also means if something goes wrong and you’re not able to repay the loan, the lender can take the property as collateral and make their money back.
Another key differentiator is that rehab/fix and flip loans typically don’t have early repayment penalties, meaning you don’t have to worry about getting dinged by a lender should you be able to pay off your loan in advance.
Like a qualified Jumbo loan, a non-QM jumbo loan is a mortgage that exceeds the Fannie Mae maximum of $510,400 on a single-family home. Unlike a qualified Jumbo loan, a non-QM Portolfio Jumbo loan uses bank statements and other methods of authorization.
Lenders can customize these loans for many different situations. Bridge loans help customers purchase a new property while they wait for another one to sell.
Borrowers use the equity in their current property for the down payment on the purchase of a new property. This happens while they wait for their current property to sell. This gives the customer peace of mind while they wait.
It is important to note that these loans normally come at a higher interest rate. And those who still haven’t paid off a mortgage end up having to make two payments—one for the bridge loan and for the mortgage until the old home is sold.
Typically, lenders only offer real estate bridge loans to borrowers with excellent credit ratings and low debt-to-income ratios. Bridge loans roll the mortgages of two houses together, giving the buyer flexibility as they wait for their old house to sell. Lenders only offer real estate bridge loans worth roughly about 80% of the combined value of the two properties. This means the borrower must have significant home equity in the original property or ample cash savings on hand.
Bridge loans typically have a faster application, approval, and funding process than traditional loans. However, in exchange for convenience, these loans tend to have relatively short terms, high-interest rates, and large origination fees. Generally, borrowers accept these terms because they require fast, convenient access to funds. They are willing to pay high-interest rates because they know the loan is short-term and plan to pay it off with low-interest, long-term financing quickly. Additionally, most bridge loans do not have repayment penalties.
No-income verification mortgages are worth exploring if your borrower is self-employed, has seasonal income streams, or generally has trouble qualifying for a conventional mortgage loan. All of these scenarios can make it complicated to document your income, which makes the simplicity of a no-verification loan ideal.
However, borrowers with low income should not use these loans as a way to disguise legitimate financial standing. Borrowers should only apply for a no-income verification mortgage if you can actually afford to make payments. These loans should be seen as a solution for cutting down paperwork, not for avoiding the common-sense question of affordability.
There are several different methods offered for limited income documentation borrowers. Below are the most common programs and who might benefit from them.
Lenders calculate income based on an average of deposits made into your personal or business accounts over a 12- to 24-month period.
Available only for investment properties, current no-income, no-asset (NINA) loans are approved based on projected rental income for the property being purchased. Typically, as long as the rent covers the new mortgage payment, no income or asset documentation is necessary.
Lenders qualify borrowers based on up to 100% of liquid assets divided by the loan term.
©2024 Capital Mortgage Services, all rights reserved.
Siwell, Inc. dba Capital Mortgage Services NMLS 149169
Licensed by the Department of Business Oversight under the California Residential Lending Act
MORTGAGE BANKER DISCLOSURE
Residential Mortgage Loan Originator: Siwell, Inc. dba Capital Mortgage Services
Organization NMLS ID: 149169
Residential Mortgage Loan Officer Royce Lewis NMLS ID: 151122
Residential Mortgage Loan Officer Linda Lewis NMLS ID: 151120
CONSUMERS WISHING TO FILE A COMPLAINT AGAINST A MORTGAGE BANKER OR A LICENSED MORTGAGE BANKER RESIDENTIAL MORTGAGE LOAN ORIGINATOR SHOULD COMPLETE AND SEND A COMPLAINT FORM TO THE TEXAS DEPARTMENT OF SAVINGS AND MORTGAGE LENDING, 2601 NORTH LAMAR, SUITE 201, AUSTIN, TEXAS 78705. COMPLAINT FORMS AND INSTRUCTIONS MAY BE OBTAINED FROM THE DEPARTMENT’S WEBSITE AT WWW.SML.TEXAS.GOV. A TOLL-FREE CONSUMER HOTLINE IS AVAILABLE AT 1-877-276-5550.
THE DEPARTMENT MAINTAINS A RECOVERY FUND TO MAKE PAYMENTS OF CERTAIN ACTUAL OUT-OF-POCKET DAMAGES SUSTAINED BY BORROWERS CAUSED BY ACTS OF LICENSED MORTGAGE BANKER RESIDENTIAL MORTGAGE LOAN ORIGINATORS. A WRITTEN APPLICATION FOR REIMBURSEMENT FROM THE RECOVERY FUND MUST BE FILED WITH AND INVESTIGATED BY THE DEPARTMENT PRIOR TO THE PAYMENT OF A CLAIM. FOR MORE INFORMATION ABOUT THE RECOVERY FUND, PLEASE CONSULT THE DEPARTMENT’S WEBSITE AT WWW.SML.TEXAS.GOV.
FOR VIRGINIA BORROWERS, TOTAL FINANCE CHARGES OVER THE LIFE OF THE LOAN MAY INCREASE IF APPLICABLE.
