Business With Greg Mortgage and Real Estate Blog

In the past there was enormous opportunities for investors to obtain mortgages. I saw loans at 100% financing on Stated income with a credit score of 620. Now things have changed dramatically and investors are struggling to finance their investment properties through a standard residential mortgage lender.

 The biggest problem we are seeing today is the way most real estate investors verify their income. Some investors are fortunate enough to work a job in which they receive a W2 and can fully document enough income to support the lenders requirements. But, the majority who were earning their living off buying and selling homes, renting homes, and sometimes self employed are not going to be able to show enough income on their federal tax returns to satisfy income requirements. Out of the applicants I see I would say it is roughly 95% of real estate investors cannot satisfy full documentation requirements.

Early last month the PMI companies stopped insuring reduced documentation loans. That meant a lender would have to risk the loan not being uninsured when over 80% LTV. Most lenders stopped doing reduced documentation loans over 80% period whether owner occupied or for investment. Very few do any loans under 80%.

With that being said the old method of buying a property, renting it out, pulling cash out of the home, and buying another is a hard dream to come by unless you can fully document your income. Most lenders who used to allow an investor to utilize full appraised value within 1 year of ownership have discontinued doing so. You are limited to the aquisition cost plus the cost of documentable home improvements.

So, if you are thinking of becoming a real estate investor and using financing to do so then many of the things you have heard about the past have expired. It is still a valid opportunity and it is still a great way to earn a living or to supplement your primary income. The minimum down payment these days is 10%. You would need to fully document your income. You may find a reduced documentation loan out there still allowing 75% LTV and 25% down payment. So be prepared. There also is rehabilitation loans for full documentation up to around 80% LTV.