Investor Solution Loans
What is an Investor Solution loan?
When it comes to investment properties, it can sometimes be challenging to qualify for a mortgage based on traditional methods. Investor solution loans (also known as Debt Service Coverage Ratio – DSCR loans) are a Non-QM option designed to utilize a property’s potential or current rental income to purchase, refinance, or cash-out on some of the equity. They can be originated by various types of lenders but are not commonly available at most banking institutions. They follow their own unique set of guidelines that can differ greatly from Conventional rules.
What are the general requirements to qualify for this type of loan?
Qualifying for this type of loan requires calculating the lower of the subject property’s market rent disclosed on an appraisal or the lease rental agreement divided by the monthly PITA housing payment. Generally, the rent (or potential rent) must meet or exceed the monthly mortgage payment, however there are exceptions to this. First-time investors are permitted in certain instances and FICO score requirements can start as low as 620 based on the loan-to-value, property type, and purpose of the loan. If purchasing, down-payments can start as low as 15% down but reserve funds are often required as well.
What types of properties can I use this loan type on?
These loans are ONLY to be used on investment homes. Most standard property types can qualify but may not work for unique homes or those zoned for commercial usage. These types of loans are most often used on single-family homes or multi-unit properties. Refer to your loan officer for confirmation on the use of this loan for specific properties.
Is there mortgage insurance for this type of loan?
One of the biggest benefits to this type of program is that it generally does not require mortgage insurance.
Who are these loans best suited for?
These types of loans are only for investors. Those with landlord and investor experience can benefit greatly from this product to either buy or cash-out on an existing investment property. However, those who are looking to become a first-time investor can also take advantage of this program in certain cases. Interest rates vary but can be comparable to Conventional loan rates depending on market conditions. If you have good to great credit and a fair amount of funds available for down-payment, closing costs, and reserves, this might be the right option for you.