Mortgages & Creative Financing

Ring in Your New Year With an All NEW Niche Loan for Your Residential Income Properties!

Expertise: Mortgages & Creative Financing
12 Articles Written
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Are you an investor who has run into the "no more than 10 financed properties" problem when applying for traditional financing on your investment property? Or are you an investor who has been turned down for "excessive debt to income ratio" because too many of your cash flowing rental properties are leveraged? If so, there is at least one lender that is now offering a new loan product for this exact situation. It's called the Investor Edge by United Wholesale Mortgage.

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Personally, I’ve only run into this problem once as a loan officer. Granted, I live and work in a very high cost area, but there are parts of my state (California) — and I’m sure many parts of the country — where this is a problem. Most investors that I know who are at this threshold are quite experienced in investing and can creatively invest from that point forward.

Related: The Investor’s Complete Guide to Filling Out a Successful Loan Application

But I know there are some of you out there who may benefit from the Investor Edge, so I’d like to explain some of the guidelines and how they are different from what you already know about traditional mortgage loans on investment property.

Here are the basic guidelines for this new loan and how it may apply to your situation as an investor.

6 Basic New Loan Guidelines for Investor Edge

1. It offers purchases and refinances of residential non-owner occupied properties from 1-4 units.

The minimum loan amounts go from $75,000 for 1-unit properties, all the way up to a maximum loan amount $1,000,000 for 4-plexes. And various scenarios in between for 2-unit properties and 3-unit properties. Basically, any residential property can qualify.

2. The maximum loan-to-value ratio is up to 75%.

This is pretty standard for investment properties, whether you're using the Investor Edge or a more traditional non-owner occupied loan. You're most likely going to have to have skin in the game or equity (as it applies to refinances).

3. The minimum FICO (credit score) is 720.

Again, this is the standard for non-owner occupied investment property loans. Chances are, if you're using financing to leverage your rentals, then this won't be an issue.

4. There is no minimum or maximum number of properties financed.

For most lenders, they will currently finance up to five of your properties, and you can have no more than ten properties financed overall. This new guideline should open up some doors for many of you. You no longer have to worry about how many properties you have financed.

If you have 10, you can still get this loan. If you have 20, you can still get this loan as long as your property is cash flowing. Most of the lenders are still only financing up to five in-house, but they aren’t worried about the total number anymore. That’s a good thing as long as the deal makes sense.

5. The maximum property debt-to-income (DTI) ratio is 65% for 1 unit, but up to 80% for 4-plexes.

This guideline is the kicker as far as how this loan differs from other, more traditional investment property loans.

Normally, the DTI for a traditional mortgage loan is calculated against all of your debt and all of your income. That means that every single other mortgage payment you make (along with car payments, personal loan payments, credit card payments, etc.) and every single bit of income you make from your rentals or otherwise needs to be documented and factored into the debt to income ratio. Loan files look like giant books with the sheer amount of paperwork needed to complete these loans.

Related: 8 In-Depth Questions You Should Be Prepared to Answer When Applying for a Loan

On the contrary, to calculate the DTI on the Investor Edge, you simply divide the monthly payment PITIA (principle, interest, taxes, insurance, and association fees) by the gross monthly rental income to determine the DTI.

DTI = Monthly Payment (PITIA) / Monthly Gross Rental Income

In other words, the better the property is cash flowing, the more likely you are to get approved with this product. This solves many of the excessive debt to income problems associated with investment property.

6. It requires disclosure of employment information only on the loan application.

This guideline goes along with #5 above, and it’s really cool for us as lenders/brokers. Since only the property income is used to calculate the DTI, you don’t need to disclose your personal income, just the income of the property. (Side note: you do have to disclose who your employer is whether that be as a wage earner or self-employed.) On a normal loan application, you would have to factor in your employment income into the DTI. This new guideline makes it so much easier to qualify with a lot less paper work.  That saves time for everyone involved.

Conclusion

Lastly, I’ve already priced out some scenarios on the Investor Edge to see how this pricing looks compared to other, more traditional mortgage loans. It’s anywhere from 1.5-2.0% higher than normal non-owner occupied loans. But with the new DTI calculation for this product and the no maximum for number of properties financed, I think it is well worth the higher interest rate especially if you can make the numbers work with your cash flow.

Looking at this new loan product from the outside, I’m pretty sure this is one of those loans where the banks/lenders were thinking to themselves, “What the heck are we doing? Here is a group of people (investors) that are bringing us solid deals that cash flow and minimize our risk as much as possible, but we can’t do the deal because of outdated rules.” To be honest, they must have realized that when you have close to 10 financed properties, you probably know what you’re doing as an investor.

I'm really glad the lenders are starting to open up their credit and realizing that investors are solid business people who really help to drive the real estate market of this country. Everybody needs a place to live, and nothing beats a solid, passive income generating investment property.

Good luck and happy investing.

What questions do you have regarding this new loan product?

Submit your comments below.

Jeff Trevarthen is a mortgage advisor at CrossCountry Mortgage and lends in all 50 states. With 16+ years in real estate finance, Jeff is an expert at coming up with creative loan solutions for all...
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    sean ploskina
    Replied over 5 years ago
    Glad to see this! Is this a common product among the larger banks or something found at smaller local ones? Is there a name for it so I can ask the banks in my area or would it be better to describe it?
    Jeff Trevarthen Lender from San Jose, CA
    Replied over 5 years ago
    Thanks for the comment Sean. Im not sure about the larger banks. Usually they are only concerned about owner occupied loans as thats the majority of their business. Since I’m a broker, this is one of the bigger wholeaale lenders that I use. Send me a private message and I’ll help you find a broker in your area who offers this product.
    margaret smith
    Replied over 5 years ago
    Hi Jeff- Really interested in your article. I only have two cash-flowing properties, but cannot/will not submit to the misery of trying to prove my personal income. As an investor, this is too complicated, and my experience is that banks won’t be interested in me as I don’t have a W-2, except a small one from my own business. So- this type of loan could be for me! HOW can I send you a “private message” as you advised Sean to do? I am in St. Pete, FL. Thanks, and Happy 2015!!!
    Chris Wyche Real Estate Investor from Philadelphia, PA
    Replied over 5 years ago
    Nice product, Jeff. Are these loans nation-wide?
    Jeff Trevarthen Lender from San Jose, CA
    Replied over 5 years ago
    Yes, nationwide. Thanks for commenting Chris.
    Richard G.
    Replied over 5 years ago
    Thank you for such an informative article, looks very advantageous for multifamily 3 or 4 unit properties as the higher the cash flow the better the lender will look upon you, versus single family homes! But ditto from a previous comment, not sure of the name or is it better to describe this type/style of loan!!!!!
    Keith Martin Vendor from Plano, Texas
    Replied over 5 years ago
    Great idea! I have the same questions – what’s it called? And is it nationwide?
    Richard G. Investor from Alexandria, Virginia
    Replied over 5 years ago
    Thanks! Much appreciated – message sent.
    Bob E. from Queen Creek, Arizona
    Replied over 5 years ago
    Three questions: 1) What is this product called 2) What are the loan limits for this product? We have problems because we have property in the midwest with an ARV of 40-50k that we want to finance but the loan amount does not meet the lenders minimum. 3) Is this product available to an LLC?
    Bob E. from Queen Creek, Arizona
    Replied over 5 years ago
    .
    Tim Farrell Real Estate Investor from Reno, Nevada
    Replied over 5 years ago
    Jeff… messaging not working.. can you information regarding these products to [email protected] Thanks
    Douglas Skipworth Rental Property Investor from Memphis, TN
    Replied over 5 years ago
    Great article, Jeff! I’m in Memphis, TN and need access to lenders who are offering this product. Can you message me directly or send me an email? Thanks so much. Happy New Year!
    Mike Hartzog Lender from Redmond, Washington
    Replied over 5 years ago
    Thanks for the article Jeff. Please send details. [email protected]
    Joe Goodfellow
    Replied over 5 years ago
    Jeff You don’t state if these mortgages are 30 year fixed rate or 15 year adjustable. Does this mean we can get a 30 YEAR FIXED RATE MORTGAGE even if we have 10, 11, 12 or more mortgaged properties? I’m sure you are aware that for some time now we have been able to get 15 year adjustable rate mortgages even if we have more than 10 mortgaged properties. Thanks, Joe
    Jeff Trevarthen Lender from San Jose, CA
    Replied over 5 years ago
    This product is a 30 year fixed only. It doesn’t matter how many financed properties you have. Hope that helps Joe.
    Brian
    Replied over 5 years ago
    Yes can you please send me this information also. Thank you
    Dave Carpenter
    Replied over 5 years ago
    Jeff, Great article and I appreciate the bullet points for a quick glance before diving in. One question that I don’t think was addressed is regarding the calculation from #5. How do they calculate monthly gross rental income for a property that is not performing, or performing? Seems like that is a loose number that is dependent on the market and how well the investor markets and presents the property.
    Jeff Trevarthen Lender from San Jose, CA
    Replied over 5 years ago
    Dave…great question! For properties that are performing, they’ll need 1) a copy of the current lease which as to be at least 1 year, but can convert to month to month, 2) 3 months rental payment verification, 3) evidence of security deposit. For properties that aren’t performing (or new purchases) they’ll use the appraisal to determine the monthly rent.
    Anthony Thompson Buy and Hold Investor from Cranston, Rhode Island
    Replied over 5 years ago
    Is this a fixed rate loan, or is it going to adjust every 5 years like most commercial loans? Also interested in the question someone else asked about whether property can be owned in an entity such as an LLC or trust. (I assume the loans are recourse, requiring signing personally regardless of ownership entity, but as I’m sure you know, owning in an entity is almost required in our industry as a first line of defense against frivolous lawsuits.)
    Jeff Trevarthen Lender from San Jose, CA
    Replied over 5 years ago
    Hi Anthony, The product is a 30 year fixed rate loan only. They will not lend to an LLC or trust. Definitely a recourse loan when you’re dealing with residential properties. Hope that helps, Jeff
    Eric McCully
    Replied over 5 years ago
    Also in Memphis. Can’t get messaging to work so please email me info on how to obtain this. Great article, hope to take advantage of this. Great cash flowing properties in Memphis/Desoto.
    Ron Tucker
    Replied over 5 years ago
    This very interesting and I’m like everyone else seeking information on who offers this product. Please include me in email that provides banks or mortgage companies in Texas ( Dallas area). Thank you for this info and a great way to start off a new year.
    Terri
    Replied over 5 years ago
    Hello. So happy to hear that lenders are finally waking up and offering something for those of us who know what we’re doing. I have pretty much the same questions as the others have posted here. I’d be so happy if you would send me that information as well. My email is [email protected]. Thanks!
    Jeff Trevarthen Lender from San Jose, CA
    Replied over 5 years ago
    The loan product is called Investor Edge and it’s offered by United Wholesale Mortgage. Thanks for the comment! Jeff
    Frankie Woods Investor from Albuquerque, NM
    Replied over 5 years ago
    Thanks for sharing the name of the mortgage! This is great!
    Tyrell Anderson Rental Property Investor from Colorado Springs, CO
    Replied over 5 years ago
    Jeff, Thank you for sharing the great information. Really appreciate it! I would love to find out more as well if you have time. Thanks again,
    Daniel Rawlings from Ozark, Alabama
    Replied over 5 years ago
    Jeff, Great article. Can you please include me in your email with the name and information of this loan. Also can I use this type of loan just starting out or do I have to have 10 or more properties? Thanks!
    Jeff Trevarthen Lender from San Jose, CA
    Replied over 5 years ago
    Good question Daniel! You can use this loan if you’re just starting out.
    Robert M. Investor from Atlanta, Georgia
    Replied over 5 years ago
    Jeff, Thanks for the information. an you send me the information on the loan type and any lenders you know of in Atlanta?
    Jeff Trevarthen Lender from San Jose, CA
    Replied over 5 years ago
    I’ll see what I can find for you.
    Robert M. Investor from Atlanta, Georgia
    Replied over 5 years ago
    Thanks Jeff!
    Kyle Hipp Investor from Appleton, Wisconsin
    Replied over 5 years ago
    This just seems to be a commercial financing concept and that has been around a long time. The interest rates on this products seems a little higher than a commercial mortgage and there are a few other details that would need to be answered to clarify further. Could it be that there is simply a newer market for this paper that has allowed financial institutions to offer more and sell off to institutional investors?
    Jeff Trevarthen Lender from San Jose, CA
    Replied over 5 years ago
    I’m not sure, but that’s a great question. The investor market for residential properties is still tight in regards to financing and this is, at the very least, a step forward. Thanks for commenting Kyle.
    Mike Williams Investor from Dalton, Georgia
    Replied over 5 years ago
    Great post! I see many posts on BP about how to become an investor and a lot of posts that are directed at newbies (rightfully so – not complaining, just pointing it out). Nice to see the seasoned investors getting a little love! Thx for the info, I will certainly check into this lender.
    Kunio
    Replied over 5 years ago
    Thanks for the great post. I’m wondering if there is no LTV requirements at all with Invester Edge. Do you have by idea about it?
    Jeff Trevarthen Lender from San Jose, CA
    Replied over 5 years ago
    LTV up to 75%.
    Ron
    Replied over 5 years ago
    Hi, Would you know if it applies to foreign nationals as well? As a Canadian it’s much harder to get loans south of the border Thank you..
    Jeff Trevarthen Lender from San Jose, CA
    Replied over 5 years ago
    Hi Ron…according to the guidelines, no foreign nationals are allowed. Sorry. 🙁
    Larisa G. Residential Real Estate Agent from San Diego, California
    Replied over 5 years ago
    Hi Jeff, Great article! I have a question about #5. Do they calculate Debt-to-income ratio only for the property investor buys or they include all properties the investor has and all income and debt from these properties into 65% max?
    Jeff Trevarthen Lender from San Jose, CA
    Replied over 5 years ago
    Thanks for commenting…the DTI is calculated on the subject property only. 🙂
    Sam M. Investor from Diamond Bar, California
    Replied over 5 years ago
    Dear Jeff, thanks for writing this article – I will contact UWM and check it out. I have a related question for you… The article is based on the max of 10 loans that people run into, but I have run run into a max of 4 loans. All the banks I have asked will not give me a 5th loan. So my question is, how do you get the 5th through 10th loans?
    Jeff Trevarthen Lender from San Jose, CA
    Replied over 5 years ago
    There are lots of lenders that will loan on properties 5-10. In my experience, it’s usually the smaller banks who offer niche products. Often times a mortgage broker will have better access to these products. Banks tend to focus on volume and that means owner occupied loans for residential.
    Eric Jorczak Investor from Ocoee, Florida
    Replied over 5 years ago
    If my rental home is owned in my LLC and a Land Trust, do I have to record a deed back into my personal name, then personally sign for the mortgage. Or can I leave the rental in the LLC/trust ownership and still get the loan?
    Jennifer Talcott from Brandon, Florida
    Replied over 5 years ago
    Great resource Jeff. Thanks for posting. Is there any pre-payment penalty on this product?
    Jeff Trevarthen Lender from San Jose, CA
    Replied over 5 years ago
    Hi Jennifer. Thanks for commenting. I just went through the guidelines, but couldn’t find anything. I would assume it’s 6 months like most products, but don’t quote me on that. 🙂
    Aj Saporito
    Replied over 5 years ago
    The smaller community banks, or credit unions usually offer better rates. Usually they will not lend out to newbie that easily unless you have portfolio of properties or at least 1-4. For the bank it’s a risk, unfortunately a lot of investors bought properties at peak in 2005/2006 and then went bust. Lenders are very conservative, require at least 20%, high FICO score, no delinquencies, no bankruptcy, solid job history, low debt, etc.. They want to minimize risk, for them you have to prove your worthy to get a investor loan, under wiring is very strict these days for any loan. It’s not like old days in 2005 where you could buy a house with no job! 🙂
    Karim Noorali Investor from Colleyville, Texas
    Replied almost 5 years ago
    apologies for reviving an old thread – this sounds like a great product but have been searching for a broker offering this product in Texas with no luck – would appreciate any help locating one please?