Not Your Everyday Home Loans-
Opportunities for Self employed, passive Income Earners, and Investment Property Owners
If you are paid with 1099 income, are self employed, have passive income or own investment homes, there are loans specifically for your situation. A lot of people think that a borrower needs to earn W-2 income in order to be able to qualify for a home loan.
There are many loan product options for outside the normal, everyday W-2 income earners. Here is Part 2 of this article.
Passive Income –This loan is for borrowers with rental income, Social Security benefits, and retirement income. 75% of the rental income is used to allow for gaps in rent. Plus taxes and insurance are deducted. The amount received from Social Security and retirement accounts can be grossed up if they are not taxed.
Asset Depletion - This type of loan is solely based on a borrower’s assets. Employment does not need to be verified. Examples of allowable scenarios are: Primary home purchase 90% loan to value, up to $1,000,000 loan amount with 660+ credit score. Vacation home or investment property, 75% loan to value, up to $1,000,000 loan amount, and 660+ credit score. Minimum loan amount is $100,000. Borrowers will need to provide asset statements covering the most recent 6 months. Gift funds are allowed once the borrower has put in 5% of their own funds. Sellers can pay 3% of the purchase price to cover some closing costs.
Allowable asset accounts: Marketable securities, retirement account (using 70% of the total balance unless the borrower is already retired. In that case you can use 80%), Cash surrender value of an annuity or life insurance contract, and Bitcoin (50% of the value unless it is liquidated and deposited into another account).
The calculations used: 1. Assets of 125% of the loan debt post closing. 2. Assets of 120% of the mortgage debt plus 30% of all other debt. 3. 100% of loan amount plus reserves and 60 months debt service.
Investor Cash Flow – With this loan qualification is based on the Debt Service Coverage Ratio (DSCR) 1% or higher. Income and employment are not considered; just fair market value covering principal, interest, taxes and insurance 1:1. Borrower needs to have at least one year landlord experience (can be in the past).
Rent calculation is the lesser of the appraisal or lease. Examples of specifics, 80% loan to value, up to $2,000,000, and credit score of 680+ for a purchase or refinance. Cash out can be done at 70% loan to value up to $1,000,000, and a credit score of 660+.
Gift funds are allowed once the borrower has contributed 5% of the purchase price. Sellers help is limited to 3% of the purchase price.
As you can see, there are quite a few home loan options beyond the requirement of W-2 income. There are numerous ways to structure a loan. Be sure you are speaking with an experienced Mortgage Broker when you are considering one of the most expensive purchases in your lifetime.
JoAnn Moore, Licensed Mortgage Loan Originator, NMLS #165477. The Mortgage Market of Delaware, LLC is a mortgage brokerage covering the State of Delaware. Office 302.855.1306, Cell 302.236.1229. MMODJoAnn@aol.com
Comments(3)