We can arrange investment property financing with a credit score below 600.
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Private money mortgages are available for investment properties with credit scores below 600. Interest rates are reasonable. We have relationships with non-traditional "private money lenders". Although "hard money" is available if needed, we are in constant pursuit of, and therefore maintain relationships with an assortment of lenders more preferred by and for our clients. For low credit scores (below 600); we can access a myriad of private investment property lenders to respond for the needs of many unusual scenarios.
Why finance credit scores below 600 for investment property transactions?
Traditional investment property lenders, such as Fannie Mae for a 1-4 residential house, or a big six bank portfolio mortgage for an office complex or apartment building, are not financing clients with credit scores below 600. Does this make sense? Maybe not. If the provable rent roll on an investment property more than supports the PITI on the property, then we think credit scores should play a significantly lower role in the approval process. Furthermore, if there is additional security such as equity in the property, then we factor low credit scores inconsequentially in underwriting an otherwise profitable loan.
Credit scores have become the primary element of automated underwriting. Prior to the overwhelming need to process and underwrite with credit scores, investment property lenders used similar techniques to what we are seeing with our private lenders. It's a logical form of manual underwriting. If a property can operate in the green; and if it has sufficient equity to carry a potential default, a borrower/guarantor credit score below 600 can be either overlooked. If a credit score is below 600, often we can apply other compensating factors to approve financing.
Minimum credit score requirements are set by major players on Wall Street. They are likely set somewhat higher than necessary as a side effect of lenders that Wall Street finances, leaning on credit scores to simplify their approval process, in an attempt to produce a less risky and more profitable pool to sell to Wall Street. It's a simple answer for the majority. However, it penalizes a group of people that it should not. It also misses opportunities to for Wall Street. It also affects the national economy. About 25% of real estate investors and landlords that have been working hard in this economy and succeeding in the up-keep of profitable rent rolls have fallen behind on other bills. They may have simply maxed out their credit lines for old and possibly irrelevant debts; and as a result have unintentionally driven their credit scores down below 600. However, the majority group of these same people have maintained profitable rent rolls and performing mortgage notes on their investment property(s). Money that could otherwise flow and move around in the national economy from their investment property transactions; purchase, refinance and/or business related real estate acquisitions, lays dormant.
UNDERSTANDING OUR GUIDELINES FOR CREDIT SCORES BELOW 600
(INVESMENT PROPERTY FINANCING)
25% Down Payment is usually required
Seller can hold 5% to 10% carry back mortgage bringing buyer down payment requirement down to 15% - 20%
Seller can pay all closing costs
Credit Score below 600 allowed
Stated Income programs available (Provided subject property rent or future rent produces 1.1 DSCR or income amount stated compensates the difference)
Long Term Investment Property Financing:
Full Income and Asset (rates in the 3s)
Stated Income and Asset (rates in the 6s)
Strategic, Creative Financing
Single Family Investment Properties (Including Condos)
2 - 4 Family Properties
No max loan limit on
10 year ARMs - NO BALLOON
LLCs, Corporations, Partnerships, Individuals
Deed & Equity Transfer Refinances
High Loan to Value Ratios
Low Debt Service Ratios
10 Day Closings
We also finance:
Mixed Use Properties
And many other property types
- Apartment buildings & complexes
- Commercial buildings & complexes
- Office buildings & complexes
- Warehouse buildings & complexes
UNDERSTANDING GENERAL TRADITIONAL GUIDELINES
FOR INVESTMENT PROPERTY FINANCING
The following are NOT, our guidelines. They are only provided as a comparison to our requirements. Our basic common sense underwriting requirements allow us to close and fund a transaction in as little as 2 weeks.
30% Down Payment is usually required
DSCR on properties no less than 1.25
Credit Scores below 600 are not allowed. There are no compensating factors, guidelines or underwriting allowances to work around same.
Credit Score Requirements can be as high as 720+
2 Years complete Income Tax Returns with all schedules (Personal and Business)
Year to Date Profit and Loss Statement (Personal and Business)
Often leases on other guarantor owned properties are required to substantiate guarantor financial strength.
Verification of payment history for all guarantor's mortgages and notes on all real estate properties owned by guarantor; both business and personal.
Up to 6 months bank statements can be required, both business and personal
Letters of explanation for blemishes on credit report, all inquiries and every address listed on credit report within the past 20 years.
No bankruptcy, foreclosure, modifications or short-sales within the past 4 years. Some lenders require 7 years.
No collection accounts, charge offs, judgments and/or tax liens can be showing an open balance.
No open disputes on credit report.
First time investment property buyers can have their "Loan to Value" reduced just prior to "clear to close" per a final stage of underwriting review.
In summary, our Investment Property programs for acquisitions, general purchases and refinancing:
a) Provide private mortgage financing for credit scores below 600; and
b) Remove many other traditional guideline requirements which can unexpectedly interfere; delay and ultimately prevent a transaction from closing.