The 3 reasons to use a Non-Prime Loans instead of a Conventional Mortgage

Credit Challenges

Primarily due to:

• Credit card or Mortgage Lates
• Excessive Late payments
• Bankruptcy
• Foreclosure
• Forbearance
• Short Sales.

Inability for Self Employed borrowers to support their income with Tax Returns. 

To address this we can offer you the ability to document your income with Bank Statements instead of Tax Returns.  They programs have rates and fees that are typically higher than Conventional lending.  But it’s a great option to have!   There are products that require: 

• 3 months
• 12 months
• 24 months

Inability for Property Owners to support their income with Tax Returns. 

Instead of providing two years of taxes to support rental income, a simple Lease, or market analysis of market rents can be used to document Rental income. Property expenses like taxes, insurance are compared to the Gross Income as part of the underwriting process.

Guidelines by Loan Program:

NON-PRIME LOANS: 

Property types:

Single Family Homes, 2-4 units, condo, townhomes, Non Warranted condos, Condotel, Adult Care Facility, Rural Property

Loan amounts:

From $100,000 to $3,000,000

Rates:

From the high 3%’s – 8%’s

Loan to value:

Up to 90% on purchase

Up to 80% on Refinance.

Credit Tiers are based on:

Fico Scores:

•  Down to 575

Bankruptcy, foreclosure:

• Considered after 1 year.

Short Sales and Deed-in-Lieu:

• Considered after settlement.

Income Documentation options:

#1. Traditional Income: (See FHA above for examples)

#2. Bank Statements:

• For self Employment only.
• 12 – 24 months business (Generally speaking: 50% of the deposited, or 100% of Personal deposits, are considered Income)
• Proof of self employment.  Not limited to, but generally, licensed, letter from CPA, website.
• These rates and fees are higher than Fannie mae, or FHA type loans.

Please note, these products may have a higher interest rate, more points or more fees than other products requiring documentation.

#3. Debt Service Coverage

• For rental properties only
• Income is solely on the income and expenses of the property.
• No other income or employment required.
• Pre-payment penalties can be bought down or paid off at closing.

#4. Asset Depletion

• Only assets are used in lieu of income.
• The amount of assets should cover the entire loan amount, OR, the amount that cannot otherwise be covered with other income.

General information:

• Interest only payments are available
• Term offered is 30 year fixed, or 5/1 or 7/1 ARMS.
• All loans require impounds.

FHA: 

Property types:

Single Family Homes, 2-4 units, condo & townhomes

Loan amounts:

Maximum loan amounts set by county, and state.

Mortgage Premium Insurance required.

Credit score of 500 – 579:

     Loan amounts are available up to:

• 90% of the purchase price on purchase transactions.
• 90% of the value for Refinances with no cash out.
• 80% of the value for cash out Refinance.

Credit score of 580 or higher:

     Loan amounts are available up to:

• 96.5% of the value for a Refinance Loan purchase
• 96.5% of the appraised value for a Refinance with no cash out.
• 80% of the appraised value for a cash out refinance.

Income documentation:

Traditional income documentation is required.

     Salary or Hourly Employees:  

• 2 years w2s and year to-date paystubs.

     Self Employed:   

• 2 last of the last filed tax returns and year to-date Profit and Loss and Balance sheet.

     Retirement:   

• Social Security, Pension, IRA Distributions.

 Down payment for Purchase loans

• Source of funds need to be documented.
• Gift of down payment permitted from immediate family members.

Fine print! All loans are subject to approval.  Rates and terms are subject to change.

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Purchase & Refinance

It’s exciting buying a property, and we are excited to help you with the financing. If you are either buying the property for you and your family, or for investment purposes, here is some information that should help you understand what’s out there in terms of products:

Down Payment:

If you are buying the property for yourself or your family then:

• 0% – You can buy a property with zero down if you are an eligible veteran
• 3% – FHA loan or Fannie Mae or Freddie Mac’s program.
• 5% to 15% – Typically require you to obtain mortgage insurance or you end up with an interest rate that is effectively a little higher.
• 20% – the amount required to avoid mortgage insurance on a fannie mae or freddie mac type of loan.

If you are purchasing a residential property for investment purposes then:

• 15% – is possible through an institutional lender if you have a credit score or 700 or higher.
• 20% – is possible through an institutional lender if you have a credit score or 600 or higher.

Credit Scores:

• 500 – This is what is typically referred to as, Non-prime, and would likely require 35% down-payment, and would be offered at a higher than normal interest rate.
• 600 – This score opens the door to GSE type loans like FHA and Va loans.
• 620 – Is usually the score needed to get a fannie, Freddie Mac type loan.

If you are purchasing the property for investment purposes, underwriting guidelines for Credit Scores are not as formulated, but factor in to the investor’s analysis of the property and the terms they are willing to offer.

Income:

If you are purchasing a home for yourself then you must show your ability to repay your loan. That is typically based on a 43% debt-to-income ratio. There are some products that will go as high as a 50% debt-to-income ratio.
If you are purchasing a home for investment purposes then the ability of the property to pay the potential mortgage and related property expense is analyzed instead of your ability to make the payments.