All Forum Posts by: Jerry Padilla

The 5% down payment will only apply to primary home buyers looking to start their investment portfolio.  Most NON-QM lenders will allow for a 20% down payment for investors on 2-4 unit properties, as Conventional financing is 25% down for 2-4 unit properties.  A couple of lenders in the NON-QM world will allow for a 15% down payment for an investment purchase. 

Paul, 

VA still has the old mentality for rental income on other properties owned. So you are limited rental income produced from the tax returns. Below is VA guideline for rental income. You do have higher theshold for DTI's with a VA loan over conventional loans.

Verification of Rental Property Income
Obtain the following:
-documentation of cash reserves totaling at least 3 months mortgage payments (PITI), and
  -individual income tax returns signed and dated or lender-obtained tax transcripts, plus all            applicable schedules for the previous 2 years, which show rental income generated by the             property.
• If the borrower has multiple properties, the borrower must document 3 months of PITI for each property to consider the rental income.
o If there is not a lien on the property, 3 months reserves to cover expenses such as taxes, hazard insurance, flood insurance, homeowner’s association fees, and any other recurring fees should be documented for the property(ies).
o Equity in the property cannot be used as reserves.
o Cash proceeds from a VA refinance cannot be counted as the required PITI on a rental property. The reserve funds must be in the borrower's account before the new VA loan closes.
o Gift funds cannot be used to meet reserve requirements.

• Analysis of Rental Property Income
o Each property(ies) must have a 2-year rental history itemized on the borrower’s tax return.
o Property depreciation claimed as a deduction on the tax returns may be included in effective income.
o If after adding depreciation to the negative rental income, the borrower still has rental loss, the negative income should be deducted from the overall income as it reduces the borrower’s income.
o If rental income will not, or cannot be used, then the full mortgage payment should be considered and reserves do not need to be considered

@Ethan Schultz

It is possible to get an FHA or conventional using a non-occupying coborrower. The only restriction is that the property can only be a single-family dwelling. Do keep in mind the non-occupying would have enough income to cover their debts and the new mortgage payment.

If you have established credit scores and no monthly debt obligations, then you could possibly find a multi-family that would cover the mortgage payment to meet the debt-to-income ratios. This scenario can be challenging to find, for example, a 4-unit property. The other three units' income must be high enough to cover the mortgage payment. So, if the mortgage payment is $2000 a month, the gross income from the other three units would have generated $6275 a month. The lender will only give credit for 75% of the gross income, putting the total income at $ 4,706.25 monthly.

Feel free to reach out if you have any additional questions

The other alternative is going with a DSR program, but this will require a 20-25% down payment.

Hi Joe, 

We can offer financing for these purchases; please let me know if you need options. 

1. Here is a good starting point for your new journey 
2. Speak with a Lender: Start by discussing your financial situation with a lender to determine how much you can afford for a property.
3. Set a Budget: Once you know your budget, evaluate the real estate market in your desired area.
4. Contact the Local Housing Authority To determine what rent vouchers are available in the area. They can provide information about available properties that accept these vouchers, eligibility requirements, and the application process.
   
5. Search for Suitable Properties: Begin your property search based on the information from the housing authority and your budget.
6. Negotiate and Purchase: When you find the right property, negotiate with the seller and complete the purchase process.
7. Move-in and Responsibilities: After the purchase, ensure understanding of responsibilities as renters or homeowners, including complying with voucher terms and ongoing property maintenance.

Always consult with local experts and real estate professionals to navigate specific regulations and details in your area.

@Chris Holloway 

This is a lender-only requirement, not an industry minimum.   I can answer any questions you have about financing, and we can lend in OH. 

@Jamie O'Connell - Are you self-employed, or is your rental portfolio your only source of income? Not having a W-2 doesn't necessarily mean you can't qualify for a conventional loan. DSCR loans are a good option, but speaking with an investor-friendly loan officer can make a difference in approval or denial.

@Spencer Fry - Yes, it may be time for a New Lender; my statement from 5 years ago is still valid.   You only need to ensure that the property can meet the self-sufficiency test, plus you have three months of reserves.  The self-Sufficiency test is the total market rents for all four units, times 25%  for the vacancy factor, which requires the rental income to equal your mortgage payment of 100%. Example market rents - $ 4000, 75% - $3000, and total mortgage payment is $2850 - This will pass the test for Self-Sufficency.   Let me know if I can answer any additional questions.

The first and essential thing is to work with a loan officer who understands this business and underwriting guidelines.   Without this knowledge, then the process isn't going to be pleasant.  The second part is they need to understand your goals and objectives for your real estate journey.    Lastly is connecting with them individually as this is not just a transaction but a business partnership. I can say that many of my investors are friends, and I can call them anytime if I need something personally from them.     I hope you find your new loan officer who works for you. 

@James D'Amico - This is possible, but you must structure the family loan properly for conventional financing to accept it. How long will the employment gap be once everything is finalized?  Do you plan on living in the property for any period?  The new W-2 employer will need to be in the same line of work as the previous one.  Please feel free to reach out to me with any questions you may have.