Non-QM Mortgage Made Simple!

With a 10-year interest-only mortgage, consider another benefit: the period of time that you have a rate lock expires only at the end of the initial ten years. It would almost be like your mortgage approval is held over until the mortgage converts to a standard 30 year fixed mortgage.

Interest-only mortgages have incredibly enticing perks. You can keep your monthly payment low by paying just the interest portion and keeping

If you are self-employed, have a commission-based pay structure, leverage your liquid assets for gains, or have a rising income, consider a 10-year interest-only mortgage.

Highlights for Interest Only Jumbo:

• Lower monthly payment and financial flexibility
• Loan amounts up to $5 million.
• 40 years fixed with a 10 year interest only payment
• Loan amortized into a 30-year fixed after 10 years

Pros:

• Lower Initial Payments: Since you’re only paying interest for the first few years, your monthly payments can be much lower initially. This can free up cash for other investments or needs.
• Flexibility: These loans can be great for folks who have irregular income streams. Say, for example, you earn most of your income through year-end bonuses. You can make your lower monthly payments and then put down a chunk when the bonus comes in, lowering the principal.
• Tax Benefits: Mortgage interest is usually tax-deductible. You could benefit more from these deductions in the interest-only period since the entire payment goes toward interest.
• Strategic Investment: Some savvy people use the money they save from lower payments to invest elsewhere, aiming for a return rate higher than the mortgage interest.

Cons:

• Balloon Principal: Once the interest-only period ends, you’re hit with much higher payments because now you must start paying off the principal too. If you’re not prepared, this can be a financial shock.
• Home Equity: You’re not building any equity during the interest-only period. If home values dip, you could find yourself underwater on your mortgage.
• Interest Rate Risks: These loans often come with adjustable rates. If rates go up, so do your payments, and this can be on top of the higher payments when you start paying down the principal.
• Long-term Cost: Overall, you’ll end up paying more in interest over the life of the loan compared to a traditional mortgage, especially if you only make the minimum payments during the interest-only period.

Since you’re experienced in sales and problem-solving, I’d say take a hard look at both sides. Is the flexibility and initial cash flow more beneficial for your situation, or does the long-term cost and potential for payment shock outweigh those initial benefits?

Given your focus on fiscal responsibility, it’s also worth calculating the long-term implications, not just the short-term cash flow advantages. Hope this helps!

your principal amount unchanged.

Non-QM (Non-Qualified Mortgage) loans with a focus on Debt Service Coverage Ratio (DSCR) for rental income—now that’s a specialized topic! These loans are particularly interesting for real estate investors and can be quite an asset if used wisely.

What Is It?

A Non-QM DSCR Mortgage evaluates the viability of a loan based on the rental income of the property, rather than the borrower’s personal income. The Debt Service Coverage Ratio is calculated by dividing the property’s Net Operating Income (NOI) by the Debt Service (the mortgage payment). A ratio of 1 or higher generally means the property’s income covers the mortgage payment. 

How The Non-QM – DSCR Mortgage Works

These mortgages are portfolio loans that are not connected to any government agency. Approvals are primarily focused on the property cash flow.

Highlights for Non-QM – DSCR Loan

• Mortgage amounts up to $3 million for purchases
• Up to $2 million for cash-out refinances
• Maximum loan to value (LTV) is 75% on purchase transactions and 70% for cash-out refinances
• Property can fit into 3 different debt service buckets:
• Debt service greater than or equal to 1.15
• Debt service greater than or equal to 1.10 – 1.14
• Negative debt service
• Must be able to demonstrate a 12-month history of ownership and management of rental properties. Commercial properties are acceptable if there is a majority ownership positions
• Minimum credit score of 680
• No DTI required
• Minimum of 6 months reserves required**
• Purchase transactions or refinance rate and term or cash out
• Investment properties only are eligible for this program
• Single family homes, condominiums, and 2-4 unit homes are all eligible for financing
• Non-warrantable condo financing available on a case-by-case basis
• Gift funds eligible, borrower must have at least 5% of their own money in the transaction
• Interest only available
• 5/7/10 year ARM – available
• 30- and 15-year fixed – available
• Minimum mortgage amount is $300,000

Pros:

• Focus on Property Income: For investors with good properties but perhaps complicated personal income situations, this is a great option. The property’s revenue stream is the star here.
• Easier Qualification: You’re not leaning on personal income, credit score, or employment verification as much, making it easier to qualify for some borrowers.
• Portfolio Expansion: For real estate investors looking to grow their portfolio, this loan focuses on the viability of the property as an investment, allowing for more strategic acquisitions.
• Flexibility: Non-QM loans often come with more flexible terms and conditions, potentially making it easier to find a loan that fits your specific needs.

Cons:

• Higher Rates: These loans often come with higher interest rates to compensate for the added risk the lender is taking on.
• Down Payment: A larger down payment is generally required, sometimes up to 30% or more, depending on the lender and the property.
• Closing Costs: You might encounter higher closing costs and additional fees, so be prepared for those numbers when you’re doing your calculations.
• Limited Availability: Not all lenders offer Non-QM loans focused on DSCR, so you’ll need to shop around a bit to find the right fit.

Things to Consider:

Property Management: Given that the loan is based on the rental income, effective property management is crucial.

Market Research: Understanding the rental market where you’re investing is essential to ensure that you’ll maintain a positive DSCR.

Who is our – 1099 ONLY Mortgages Best Suited For?

This mortgage is an excellent option for someone looking to purchase or refinance a home and cannot provide “traditional” income documentation i.e., tax returns as a means of qualification. Unlike most mortgage programs in the marketplace, this mortgage allows you to use only your 1099’s that you receive for 2 calendar years as your form of income verification. We must run a 4506 and retrieve a 1099 transcript. This program verifies the validity of the 1099’s, ensures they have been filed with the IRS by the issuing party. This program is centered around an applicant who generates income either in the form of commissions or as an independent contractor. We do not require full tax returns or bank statements to verify deposits

1099 ONLY Mortgage Works

These mortgages are portfolio mortgages that are not connected to any government agency. Approvals are heavily focused on your 1099’s that are issued to you for the last 2 years. How long you have been in business, and how you derive your income. The focus is to understand your “business concept.”

Highlights for Non-QM – 1099 ONLY Program

• Mortgage amounts up to $3 million for purchase transactions and $2 million for cash-out refinance transactions.
• Maximum loan to value is 85% on purchase transactions and 70.00% for cash-out refinance transactions.
• To qualify it must be with 1 or 2 years of 1099’s
• A minimum credit score of 660 is required for the program.
• Max DTI is 50%
• Minimum of 6 months reserves required**
• This program is eligible for purchase transactions or refinance rate and term or cash out.
• Primary residence, second home and investment properties are eligible for this program.
• Single family homes, condominiums, and 2-4 unit homes are all eligible for financing
• Non-warrantable condo financing available on a case-by-case basis.
• Gift funds eligible, borrower must have at least 5% of their own money in the transaction
• First time home buyers are eligible
• Interest only available
• 5/7/10 year ARM – available
• 30 and 15 year fixed – available
• Minimum mortgage amount is $300,000.00
• Mortgage amounts vary based on LTV, credit, and overall creditworthiness*
• More reserves will be required for mortgage amounts over $1,000,000.00**

An Asset Utilization Jumbo Loan, sometimes called an “Asset Depletion Mortgage,” allows borrowers to qualify for a jumbo loan based on their liquid assets, like savings, retirement accounts, and investment portfolios. Essentially, the lender calculates an income stream from these assets and includes it as qualifying income.

Highlights for Asset Utilization Jumbo Mortgages

• Loan amounts up to $3.5 million
• No W2, tax returns or pay stubs required
• 40 year fixed with a 10 year interest only payment available
• 2-8 unit mixed-use properties are eligible
• Min 660 FICO to qualify
• Max LTV up to 80%
• Minimum mortgage amount is $350,000
• Mortgage amounts vary based on LTV, Credit, and overall creditworthiness*
• More reserves will be required for mortgage amounts over $1,000,000.00**

Pros:

• Wider Qualification Net: Got a hefty chunk of change in investments or retirement accounts but maybe not a high enough monthly income to qualify for a jumbo loan? This is your ticket in.
• Great for Retirees or High-Net-Worth Individuals: People who have a lot of assets but maybe not a steady income stream can still get into the home of their dreams.
• Custom Tailoring: These loans can often be customized to fit your individual financial situation better than a standard jumbo loan.
• Strategic Asset Preservation: Since you’re not actually depleting your assets to secure the loan, you can keep your investments growing.

Cons:

• Interest Rates: Like most specialized loan products, you’re likely looking at a higher interest rate compared to more standard loan options.
• Strict Requirements: Lenders will scrutinize your assets closely, and not all types of assets will qualify.
• Cost of Entry: The minimum asset requirement is usually high. After all, it’s still a jumbo loan.
• Market Risk: Your assets could underperform, making the basis for your loan a bit shakier in the long run.

Quick Tips:

Consult Financial Advisors: Since you’re leveraging your investment and retirement accounts, talking to a financial advisor to understand the implications is a good move.

Gather All Documentation: Asset statements, tax returns, and other financial docs will be crucial here.

Check Liquidity Constraints: Make sure you understand if and how the loan terms might require you to keep assets in place for a certain duration.

Who is our Non-QM – Bank Statement Jumbo Mortgages Best Suited For?

This mortgage is an excellent option for someone looking to purchase or refinance a home and cannot provide “traditional” income documentation i.e., tax returns as a means of qualification. Unlike most mortgage programs in the marketplace, this mortgage allows you to use your bank deposits instead of traditional income documentation. This program is centered around the self-employed entrepreneur, who generates income that may not be fully reflected on their tax returns.

Bank Statement Jumbo Mortgages Work

This mortgage type allows borrowers to use their business or personal bank statements as proof of income instead of traditional methods like W-2s or tax returns. These loans are especially useful for self-employed individuals or business owners whose income might not be easily defined through conventional means.

Highlights for Non-QM – Bank Statement Jumbo Mortgages

• Mortgage amounts up to $3.5 million for purchase transactions 
• Maximum loan to value is 80% on purchase transactions and 75% for cash out refinance 
• To qualify it must be with 12- or 24-months business or personal bank statements
• A minimum credit score of 660 is required for the program
• 40-year fixed interest only option
• Max DTI is 50%
• Minimum of 6 months reserves required**
• This program is eligible for purchase transactions or refinance rate and term or cash out
• Primary residence, second home and investment properties are eligible for this program
• Single family homes, condominiums and 2–4-unit homes are all eligible for financing
• Non-warrantable condo financing available on a case-by-case basis
• Gift funds eligible, borrower must have at least 5% of their own money in the transaction
• First time home buyers are eligible
• 5/7/10 year ARM – available
• 30 years fixed – available
• Minimum mortgage amount is $300,000.00
• Mortgage amounts vary based on LTV, credit, and overall creditworthiness*
• More reserves will be required for mortgage amounts over $1,000,000.00**

Pros:

• Business-Friendly: This is designed for people whose income doesn’t fit neatly into a W-2 box, making it perfect for freelancers, business owners, and self-employed individuals.
• Streamlined Paperwork: Rather than compiling years of tax returns and various other income documents, you can use 12 to 24 months of bank statements.
• Potentially High Loan Amounts: Since this is a jumbo loan, you can typically secure a higher loan amount compared to standard conforming loans.
• Credit Forgiveness: These loans often come with more relaxed credit score requirements, providing opportunities for those who may not qualify for conventional jumbo loans.

Cons:

• Higher Rates: The freedom comes at a cost. Expect higher interest rates compared to conventional jumbo loans.
• Big Down Payments: You’ll usually need a significant down payment, often 20% or more, to qualify.
• Limited Lender Options: These are specialized loans, so your lender pool is smaller. Not every financial institution will offer them.
• Documentation: You’ll still need to provide thorough documentation of your bank statements, which can be scrutinized rigorously.

Tips:

Get Organized: Make sure your bank statements are in pristine condition. Any odd, large deposits might require explanation.

Professional Guidance: Given the complexities, working with a mortgage broker who specializes in these types of loans can save you time and possibly money.

It’s good to have a good tax preparer.  They may need to give you a letter of expense factor.  This can increase the income being considered. 

This mortgage type is designed to finance multi-family properties with 5 to 8 units. Because these properties typically generate a rental income, lenders look not only at your personal financials but also at the property’s revenue potential. And since the loan amount is likely to be high, it falls into the jumbo category.

Highlights for Multi-Family (5 Units or more) Commercial

• Multi-family properties from 5 units or more

• Loan amounts up to $3.5 million
• Up to 75% LTV
• No balloon payment
• A minimum 680 credit score is required for the program
• Unlimited cash out refinance option is available
• Qualify using rental income (Debt service coverage ratio)
• No tax returns needed, qualify using rental income, or bank statements.
• 10-year interest only payment option with no balloon payment
• Lower your monthly payment with a 40 year fixed with a 10 year interest only payment
• Loan amortizes to a 30 year fixed rate mortgage after the first 10 years

Pros:

• Income Potential: One of the biggest draws of multi-family properties is the multiple streams of rental income, which can be a lucrative investment long-term.
• Economies of Scale: Managing 5-8 units in one location is often more cost-effective than managing the same number of units across multiple properties.
• Asset Diversification: For those with a diverse investment portfolio, adding real estate, especially income-generating real estate, can be a great move.
• Loan-to-Value (LTV) Ratios: Some lenders may offer favorable LTV ratios, especially if the property has strong income potential.

Cons:

• Complexity: Managing a multi-family unit is not for the faint of heart. You’re running a small business, in essence.
• High Down Payment: You’re typically looking at a hefty down payment, often 25% or more, due to the jumbo nature of the loan and the risk associated with commercial properties.
• Interest Rates: Higher interest rates are common with these jumbo loans, partly because of the greater risk involved in multi-unit properties.
• Tougher Qualifications: You’ll need strong credit, significant reserves, and a proven track record of property management, in many cases.

Tips:

• Due Diligence: Given your love for problem-solving and diving into details, you’d want to scrutinize every financial aspect of the property—operating income, expenses, vacancy rates, and more.
• Professional Help: Considering your knack for management, enlisting the help of professionals like a real estate attorney or a specialized broker can streamline the process.
• Exit Strategy: Always have one. Whether it’s selling the property after a certain period or converting it into a different type of investment, know you’re out.

Who is our Foreign National Jumbo Loans Best Suited For?

This mortgage is a great option for someone who may not live In the United States and wants to purchase or refinance a property. This program works for individuals who live and work in the United States that want to purchase but may not have a social security number, a green card or proper documentation.

Highlights for Foreign National Jumbo Loans:

• Loan amounts up to $3 million*
• Maximum loan to value (LTV) is 80%
• Must qualify full doc (or whatever version of full doc exists from the country of origin)
• No credit score is required (foreign credit reports allowed, or alternative credit allowed to show your credit worthiness)
• No social security number, green card or visa required
• Max DTI is 50%
• Minimum of 6 months reserves required**
• This program is eligible for purchase transactions or refinance rate and term or cash out. Unlimited cash out options are available
• Primary residence, second home and investment properties are eligible on this program
• Single family homes, condominiums and 2–4-unit homes are all eligible for financing.
• Non warrantable condo financing available
• Interest only available
• 5/7/10 year ARM – available
• The minimum mortgage amount is $300,000.00.

Pros:

• Access to U.S. Real Estate: It allows foreign nationals to invest in U.S. real estate without having to go through the hassle of becoming a citizen or permanent resident.
• Asset Diversification: For the foreign investor, this offers a way to diversify their investment portfolio geographically.
• Potential for Lower Rates: Even though they are jumbo loans, competitive rates can sometimes be found, especially if the borrower has a strong financial profile.
• Flexibility: They often come with more flexible terms and conditions to accommodate the unique needs of foreign nationals, like different types of acceptable documentation.

Cons:

• High Down Payment: You’re usually looking at a significant down payment, often 30% or more.
• Interest Rates: The rates are generally higher than those for conforming loans, reflecting the higher risk involved.
• Documentation: A foreign national may need to provide additional documentation, which can be a hurdle if those documents are not readily available or easily translated.
• Tax Implications: Foreign nationals may face complex tax rules when owning property in the U.S., such as FIRPTA (Foreign Investment in Real Property Tax Act) withholding.
• Exchange Rate Risk: The loan will be in U.S. dollars, so changes in exchange rates can significantly affect the effective cost of the loan.

How Foreign National Jumbo Mortgages Work

These mortgages are portfolio loans that are not connected to any government agency. These loans are ideal for a client that may not live in the US but would like to invest in real estate. Most traditional lenders require a social security number or some form of citizenship allowing you to be in the US legally. This program has no such requirements. An additional feature is that this program allows for borrowers to be living and working in the US and still qualify.