I have recently run into a string of borrowers who have been turned down by lender after lender for the purchase of investment property. These borrowers are generally investors who have accumulated multiple properties (many within the last couple of years). So what is the common problem these borrowers are running into that is stopping them from getting approval? Simply put, their lenders inexperience. Did I just say that out loud?
All of these borrowers are borrowers with credit scores in excess of 720, documentable income as well as verified cash for their down payments. So why wouldn't a lender want to make these loans. The truth is they do, they just don't know how. The problem lies with the loan officers lack of experience. Because the lender does not know how to properly document income and calculate debt ratios. They automatically assume the borrower doesn't qualify or try to qualify the borrower with a "stated income" or "no income verification" type of program (which for the most part are almost non-existent, especially for investment property). The sad part is that most of these investors qualify for a full income documentation loan if the lender had just known how to structure and property calculate the borrowers ability to qualify.
In addition, many lenders have limited the number of properties that a potential investor can have financed. Recently, FHLMC (Freddie Mac) came out with a limit of 4 properties financed at a maximum per borrower (this includes primary residences and second homes). While FNMA (Fannie Mae) has not mirrored FHLMC yet, many suspect they will. That remains to be seen at this point.
Many of the PMI companies have either eliminated investment property loans all together or have substantially changed the guidelines in which they are willing to write them under.
If you work with investors and need a lender who has a ton of experience with investment property, including purchase rehab deals, look no further. My team and I are able to help. With over 20 years experience, I am proud to be one of the Top 200 lenders according to Mortgage Originator Magazine and would be pleased to help your investors. Give us a call if we can help.
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