3 Types Of Loans You Didn't Know About

Mortgage and Lending with HomeSmart

Realtors and even clients know about FHA, Conventional, or VA loans, however, there are some other loans not many people do and clients when asking local banks deny them.

The first one is called Family Opportunity Loan. Not many people know that you can buy a 2nd house with just 5% when buying it for parents or your child. There are specific requirements based on Fannie Mae guidelines you need to follow but not many people know about this type of loan. 

The Family Opportunity Mortgage is an owner-occupied, fixed-rate loan. You generally need:

  • A 620+ FICO
  • AUS for debt-to-income (DTI)
  • Steady employment
  • Income to support your current housing costs plus the additional expense of owning another home

This last point is critical and must be unpacked in further detail. The lender will check to see if your income can sustain not only the new house payment but also your existing obligations. Your debt-to-income ratio should ideally be 45% or less, however it may be higher depending on your Automated Underwriting response.

The second type of loan is asset depletion for investors. Based on your assets you can get a loan. A borrower may utilize 70% of the balance in an investment account and divide by 240 months, according to the new regulation. As a result, this may be considered a qualifying monthly income. You'd be able to reduce $280,000 of the original $400,000 in savings under the new standards. You may now add $1167 per month to your qualifying income (dividing by 240 months).

The third type of loan is DSCR or DSR loan, which you can get based on your current cash flow. If your property is cash flowing you can get a loan based on that amount not based on your job, credit score etc.

The debt-service coverage ratio is used by businesses, governments, and individuals. The debt-service coverage ratio (DSCR) is a calculation of a company's cash flow available to pay current debts in the context of corporate finance. The DSCR is a metric used by investors to determine whether a firm has enough money to pay its bills.

  • The debt-service coverage ratio (DSCR) is a metric that determines how much cash remains in the bank to meet current debt payments.
  • The DCF is used to evaluate firms, projects, or individual borrowers.
  • The minimum DSCR that a lender requires is determined by the current economy. Lenders may be more forgiving of lower ratios if the economy is prospering.

Hope you like this short article! Expect more soon!

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Comments (1)

Debe Maxwell, CRS
Savvy + Company (704) 491-3310 - Charlotte, NC

Great information for buyers in your area Pete. Thanks for sharing!

Jun 12, 2022 01:06 PM