Best Investment Property Loans? Investors Turn To Non-QM Loans
When looking for the best investment property loans on the market, non-QM (non-qualified) mortgages can be a great option for some buyers.
For one, they have more flexible requirements than the criteria set forth by the Dodd-Frank Wall Street Reform and Consumer Protection Act that governs QM (qualified mortgage) loans. Non-QM loans may also be the best type of loan for an investment property because of the nature of the requirements.
As a result, investors now more than ever are seeking out non-QM loans to meet their cash flow goals and portfolio growth. Find out more about why investors are turning to non-QM loans as the best real estate investment loans.
Traditional mortgage loans have precise criteria that must be met to qualify. Often, this doesn’t line up with the goals for property investment. For example, a less than 43% debt to income (DTI) ratio may not be a realistic marker when funds are tied up in a portfolio of real estate. Lenders will analyze the reasoning behind a borrower’s DTI. But investors still may not qualify if the DTI is higher than ideal and the borrower’s income is uneven.
With flexible requirements, a non-QM loan can help borrowers who don’t fit the criteria purchase an investment property.
When meeting requirements for non-QM approval, lenders are more concerned with the measure of the property that’s being purchased, rather than the borrower’s current assets. Working from an analysis of cash-flow potential, lenders will evaluate how much the investment could make, given specific terms.
Non-QMs do not discriminate against unseasoned investors. First-time investors can grow their portfolios with little to no breadth initially.
Many investors work diligently to separate their personal assets from the assets of their investments. They may set up an LLC to pay themselves a portion of the profits, so they’re not directly responsible if an investment fails.
This is a red flag for traditional lenders. But with Non-QM loans, LLCs are considered an intelligent protection mode for investors. That’s because they can provide further proof of income and established taxes. Plus it shows the separation of personal and professional spending.
There is little work with non-QM loans, more than to verify and analyze the cash flow potential. Because of the focus on the collateral of current investments and the future property, there’s less focus on typical financials involved in a traditional mortgage.
Often, the process is quick so that the investment property can have additional leverage with more collateral in action. Having the property in hand for short-term users means that it can be returned to the market faster. For long-term holders, it means that tenants can begin making returns on the investment sooner than later.
Looking For The Best Investment Property Loans?
UW Funding works with investors who want to secure loans to increase their real estate portfolios. Contact us today to find out more about non-QM loans for your future investments.