Best Loan Options for Real Estate Investors | Loan Programs to Acquire Rentals 2024

I hear you I hear you Patriot Nation you want to invest in real estate and maybe you already have or maybe you want to start either way this video is going to cover the four best loans to establish the acquiring of residential real estate through financing whether you've owned a home before an investment property or you're looking to buy or maybe even have a big portfolio already doesn't matter we're going to cover some ground that you haven't seen before especially the last example I'm going to give you of the loan type if for all you Savvy guys that already have a number of homes under your belt or you've got a very strong balance sheet you're definitely going to want to see this last loan because it's rather mind-blowing so as always let's kick this Rodeo off right now oh Welcome hi folks I'm Kevin Fagan I'm the mortgage Patriot on your side here in Central Texas nestled in the Hill Country above San Antonio serving proud Texans and helping out great folks all across this great country so before I get into the content if you would hit the like And subscribe button below it really helps me build more content for you and as you probably a lot of you've already seen I've got some good content on my YouTube channel with helping you either purchase a home for your primary or your investment property like in this video is going to talk about or just refinancing a property and trying to save some money on the interest rate so can help you either way so let's get into this content right now there's lots of ways now for investors to acquire residential real estate via financing techniques I've shown you a few of those on prior videos I've got one on VA loans using a VA loan to acquire investment properties and I've got one on FHA Loans both of those strategies involve becoming the primary owner of the home initially in other words you're going to move into that home initially and then after a year or so rinse and repeat the strategy so to speak and you leave behind the home that you were previously in as a rental and you move forward with a new purchase of a new primary home that's not the strategy here what we're talking about here is buying a house just straight up for a rental property you already own your home right now or maybe you don't but usually you own your home right now you're living it obviously and you want to acquire more homes but you don't want to have to move and leave behind an existing home that you turn into a rental you want to stay where you are and just start accumulating rental properties just that Best Loan Programs simple so here we're going to talk about the four best loans to do that so let's start right now I'm going to talk about traditional financing and by that I'm going to distinguish that from non-traditional financing and that would be hard money loans private money loans and creative financing and I have access to and I understand all those Concepts I can do different videos later on those subjects but let's talk about just traditional loans many loans that are typically 10 15 20 30-year programs that meet certain needs and there's four categories the first one is just a conventional investor loan the second one is bank statement loans the third one is dscr loans and the fourth type of loan would be what I'm calling the ultimate loan I'll explain all four of these I'll give you all the requirements and guidelines and then because they fit different needs and we're going to go over each one like I said and and you'll know by the end uh what's best for you let's talk about the Conventional Loan conventional loan first because it is the one that you would want to acquire and use if you can because it's the lowest interest rate out of all these options we're going to talk about and it also probably would be the easiest in terms of qualifying let's look at those qualifying Natures right now if you are a W-2 worker you receive a W-2 paycheck or you're even if you're self-employed you have tax returns so those are the eligibility requirements you have to have either you know W-2 salary or hourly wage proved with pay stubs or you have to have in the case of a self-employed or 1099 you need to have tax returns if you have those items and you have enough income then that's the one aspect of the qualifying the second one would be credit scores your credit score is going to be a little higher than a primary purchase they need to be in the neighborhood of usually 660 is usually a starting place a lot of lenders will require so 660 and higher on the FICO scores what about debt to income ratio your debt to income ratio on a conventional investor loan it's going to be about 50 what is the debt to income ratio that's the amount of debt that you have across the board in this case your primary home monthly payment your new investment property monthly payment and your other debts like your revolving cards your installment loans your student loan and so forth all those three categories of debts into your income on a monthly basis that ratio that ratio cannot exceed 50 so relatively restricted there now a lot of people ask hey I'm investing in this property that's going to pay a certain amount of rent do I get credit for that rent the answer is yes but just not dollar for dollar so let's say that the rental amount you're going to receive based on a an appraiser going out to the property and doing an investment appraisal they're going to say hey this neighborhood usually gets about a two thousand dollar rent and so therefore the lender is going to take a factor of that usually it's 75 so you can count on about 75 percent of 2 and in this case 1 500 would be added to your income level to go into that ratio of debt to income hopefully that makes sense to you so you do get applied rental income just not a full dollar for dollar so let's talk about lastly reserves what are reserves reserves are the amount of money you need to have left over after you have the transaction closed the lenders don't want to see that they're taking your last dime so they tell you you have to have two months reserves they might say three months reserves six up to six months reserves and again what it reserves is a multiple of your mortgage payment for the investment property so for investment properties Piti principal interest tax that interest your payment your total payment is say two thousand dollars then a multiple of that would be two months would be two times two thousand so you would need to have four thousand dollars left over in your bank account or your investment accounts after the transaction is finished if they require six months you need six times two you need twelve thousand dollars left over depends on your ficos and other factors is that the lender is going to tell you you how many months of reserves you need to have left over and lastly the down payment we talked about the down payment typically of Industry standard on a conventional loan is 20 down now depend on your credit score I might be able to get you 15. but it's uh 20 typically across the board so on a 250 000 house we're talking about fifty thousand dollars coming out of pocket not including closing costs so it's pretty good bite there so anything that we can do to get down that ratio maybe to 15 of course would help you but let's get into now uh the other Alternatives Bank Statement Loan which would be the bank statement room so what are the bank statement loans uh they're pretty much as described they're going to only use your bank statements to try to qualify for the loan as opposed to the conventional loan where you can see the W-2 pay stub that you have or you can see the tax returns you have with the case of a bank statement loans you would use that because you don't get W-2s because you're self-employed and your tax returns don't reflect properly what your real cash flow is because you're optimizing all your expenses to minimize your tax returns lenders understand that you might have ten thousand dollars flowing through your bank account from your business or from all your side operations but your tax returns only reflect maybe five thousand dollars per month so that's not going to get you very far right so you can just apply with 12 months bank statements or some cases 24 months bank statements either way that's the bank statement loan it's a much higher interest rate than the conventional loan and let's go through some of the other qualifications the FICO scores are going to be 660 or better maybe six eight or even better so slightly higher cycle requirements than the conventional loan the reserve factor is going to be roughly the same about two months to six months like we talked about on the conventional side and lastly the down payment is going to be 20 I can't think of anything that would be 15 so it's gonna be at least 20 sometimes even 25 percent for bank statement loan so the times you would want to use a bank statement loan is because you do not have tax returns that can support the level of income that you need let's talk about dscr loans because that'll probably be a better alternative than a bank statement Loan in a lot of DSCR Loan ways let's talk about the third investor loan and that is the dscr loan what is the dscr loan it's debt service coverage ratio loan and it's very popular because it is simplified in that the application doesn't even ask for your employment the lender is going to be looking solely on the basis of the rental inflow versus your debt service on that property if you have a two thousand dollar rent coming in for example and your debt service your principal interest taxes and insurance on the mortgage note for the investment property is two thousand dollars then your debt service ratio is one to one two thousand over two thousand is equals one so they look at that ratio that ratio needs to be at least one or higher so in other words you need to show a positive cash flow on your property that you're investing in to obtain the DCR loan it's great because investors can just stack these loans without regard to their income the lender is not looking at your income they're only going to look at the cash flow on the property so as long as you are maintaining a good debt to income ratio aside from these properties you can buy five ten properties as long as they're all cash flowing you can just keep acquiring these properties because again they're just looking at the cash flow per that dscr ratio so it's a heck of a deal and that's why most of times if you can't qualify for that conventional loan you're skipping the bank statement loan altogether you're going straight to the dscr loan the rates are going to be roughly the same as the bank statement loan the credit scores need to be about 680 or better your reserves need to be about three months or better and again the down payment is going to be at least 20 percent and depending on where that debt ratio Falls uh it might even be 25 most of those qualifications are roughly equivalent to the bank statement loan but again it's a little bit better product maybe because you can just acquire more and more of them without regard to your income let's talk Ultimate Loan about this last loan because it's most fun and absolutely the most dynamic and most impactful to your finances if you can qualify for it I call it the ultimate loan why because there's only about four institutions across all the thousands of lenders across the country that even offer it they they call it different names in-house I call it the ultimate loan just to give it a name and why is it the ultimate loan because it is a HELOC a line of credit established on your investment property very rare opportunity and what does that actually mean well relative to a traditional loan a line of credit as you probably know can be paid down and re-borrowed again so if you have a two hundred thousand dollar ultimate loan against a rental property that you purchased and you paid it down now over the course of a year to 150 you now have immediate liquidity that you can write a check on for fifty thousand dollars to get back to that two hundred thousand dollar loan limit so you can ride a 50 000 check in this example and put another down payment on another home watch this video please because I go into detail how to use a line of credit to acquire investment properties look at this video learn it love it live it and you're going to be amazed because you're going to come back and say hey do I qualify for the ultimate loan because this is what I need so let's talk about some of those qualifications now and they're more stringent than the others by far you really need to be an A plus borrower most people cannot be eligible for it so what are they FICO scores 700 to 720 or better depending on area and certain factors but at least a 700 most of the time is 720. so FICO scores are pretty high in the a plus category debt to income ratio your debt to income ratios is very small it's only about a 43 debt to income ratio we talked about the 50 debt to income ratio on the prior loans conventional and the bank statement and the dscr but with ultimate loan only about 44 of all your debts relative to your income that's pretty tough your reserve level they're going to be asking for about six months reserves it's not the two to six months it's going to be start off at six months reserves after you close the loan you still have to have a lot of money in the bank account afterwards and lastly your down payment is going to be higher as well it's going to start off at 25 for a purchase you can do a refinance if you have investment property that you you have right now and it's free and clear let's say it's worth three hundred thousand dollars then you can get a cash out ultimate loan that would be a 30 Equity deal number 70 of the loan so it'd be seventy percent of a 300 000 home that would be two hundred and ten thousand dollars that you could access with the ultimate loan if you have a free and clear property worth 300 000 so as you can see all the different areas are a little bit tougher to get into on the ultimate level watch that video as I mentioned earlier and come back to me in the comments section or text me call me at 210-317-6514 Kevin Fagan I'm the mortgage Patriot let's find out which one of these categories the conventional the bank statement the dscr or the ultimate loan would be best for you in terms of acquiring rental properties so make it a great one folks bye-bye thank you