Financing the sale of your properties for an investor

There is A paper, B paper C paper and D paper. You’ve also got credit bureau scoring... FICO scores and beacon scores. You have LTV and CLTV. You’ve got front and back end ratios.

I’m going to discuss one small part of the real estate financing spectrum - conforming, non-owner occupied loans.

Typically, these loans are used for purchasing rental properties with one to four units. Most lenders will not allow more than 90% loan to value. This means that you need at least 10% down payment. So, to purchase a $100,000 investment property, you (or your investor) would need $10,000.

To qualify for these mortgages, you must have good credit. This means that you can’t have any late payments in the past year, bankruptcies, judgments or liens. You must also have established a record of good credit.

You must have two years on the job. It doesn’t have to be the same job, but it does have to be the same line of work.

If you’re self-employed, you must be able to show two years of tax returns. They will average the last two years to determine your qualifying income.

It doesn’t really matter what your income is when you buy rental property. The income of the property can qualify you. This is pretty cool. I helped a fellow buy $305,000 worth of rental units with 10% down (which he got by refinancing his home) even though he only had an income of $25,000 per year.

His income wouldn’t qualify him for more than a $70k purchase, but the income of the property qualified him for the purchase.