Investing in real estate can be your pathway to the American Dream, but conventional financing options can be prohibitive for self-made people with unconventional streams of income. Ironically, these individuals are often the epitome of what this dream represents. But we understand there is more than one path to reach this goal. Fortunately, financing options are still available, like DSCR loans and bank statement jumbo loans. These loan options are part of a variety of loan programs designed to meet different borrower needs, especially for real estate investors. These options are available to borrowers with a range of credit profiles, not just those with perfect credit.
Unlike many lenders who may fall short in meeting client expectations, mbanc stands out by providing non qm lending as a flexible alternative to traditional mortgage options. Non qm loans offer flexibility for borrowers with unique financial situations, such as self-employed individuals or those needing alternative documentation. In this article, we’ll discuss the key differences between loan types to help you make an informed decision.
In conjunction with the cutting-edge short-term rental intelligence powered by STR Verifi, a short-term rental calculator that empowers you to access key metrics about any property or market to qualify for financing, obtaining financing has never been easier or faster.
At mbanc, we have been helping self-made people like you finance their real estate investing journey and achieve true financial freedom for years. Our excellent customer service is rooted in dedication and personalized support, ensuring every client receives the attention they deserve.
“These loans are, in many ways, an equalizer. Both of these mortgage programs are great options for people who are interested in building generational wealth and achieving the financial freedom and independence the American Dream is built on. Still, picking the right one depends on your needs, goals, and circumstances. At mbanc, our passion is helping borrowers find the perfect program for their financial situation and goals.”* – Desh Weragoda, mbanc CTO*
What are Non-QM DSCR Loans?
A non-qm DSCR mortgage is ideal for purchasing a rental investment property and caters specifically to investors. Unlike qualified mortgages and conventional mortgage options, which must meet strict requirements set by the Consumer Financial Protection Bureau (CFPB) and are often backed by Fannie Mae or Freddie Mac, non-QM DSCR loans offer more flexible qualification standards. Qualified mortgages require rigorous documentation, income verification, and adherence to debt to income ratio limits, while non-QM DSCR loans are designed for borrowers who may not meet these traditional criteria.
With DSCR loans, you qualify using projected rental income and must provide proof of cash flow from prospective long-term and short-term rentals. This approach assesses the borrower’s ability to repay the loan based on the property’s income potential, rather than relying solely on the borrower’s income, credit score, or debt to income ratio as required by conventional loans. As a result, DSCR loans are a type of non qualified mortgages and non qm mortgages, making them suitable for non qm loan borrowers such as real estate investors and foreign nationals who may have complex finances or recent credit events.
The revenue from the property you are purchasing will cover the monthly mortgage payment. Non-QM DSCR loans may have higher interest rates than conventional loans due to their flexible qualification standards, and borrowers should carefully review loan terms, interest rates, and payment requirements, including the option for making interest only payments. In other words, with this type of mortgage, the investment property literally pays for itself, which is the beauty of this financing option. DSCR lenders like mbanc offer negative debt service loans on a case-by-case basis.
These types of loans are portfolio loans and are not connected to any government agency. They are not conforming loans and are not backed by the federal government, Fannie Mae, or Freddie Mac. Highlights of mbanc’s DSCR loan program include:
-
Loan amounts up to $3 million, 70% LTV
-
Unlimited Cash-Out Refinance options
-
No W2, tax returns, or pay stubs required
-
Alternative documentation accepted, such as bank statement loans, and consideration of liquid assets
-
Required down payment and flexible payment requirements tailored to non qm loan borrowers
-
40-year fixed and 30-year interest-only options
-
The ability to qualify using projected rental income cash flow
-
Financing for single-family homes, condominiums, 2-4 and 5-8 unit homes
-
DSCR loans do not require mortgage insurance, unlike conventional loans backed by Fannie Mae or Freddie Mac
To qualify for this financing option, DSCR loan requirements include providing proof of the following information about a prospective investment property:
-
12 months of projected income
-
An occupancy rate of 65%+
-
6 comparison properties within 2 miles of the property and similar in size, room count, amenities, availability, and occupancy
-
An overview report of the property
-
A market grade by zip code of “B” or higher
DSCR loans are available for eligible properties, including investment properties, but are not typically used for a primary residence. They can also accommodate borrowers with recent credit events, such as a short sale or bankruptcy, and may be available to those with lower credit scores or unique financial situations. DSCR loans are available for loan amounts above conforming loan limits, making them a flexible option for larger investments.
Still, calculating and making these projections to qualify for financing is difficult without considerable expertise and experience. Fortunately, STR Verifi levels the playing field.
Using the short-term rental data analysis powered by this software, you can access this information instantly for any property in the United States to qualify for financing in a streamlined process and put any market at your mercy. When applying for a DSCR loan, it is important to manage your finances and monthly debts, as lenders will review your overall financial profile to ensure borrowers can repay the loan by focusing on the property’s cash flow, rather than just personal income.
What are Bank Statement Jumbo Loans?
You don’t need us to tell you – conventional lenders have lending requirements that are prohibitive for people with an unconventional income, like self-employed business owners.
Bank statement loans are a type of non-QM mortgage that use alternative documentation, such as bank statements, to verify income instead of traditional tax returns or W-2s. These non-QM loans are ideal for self-employed borrowers, real estate investors, and foreign nationals who may not qualify for conventional loans or conforming loans backed by Fannie Mae or Freddie Mac.
But, at mbanc, we celebrate people with untraditional incomes who have succeeded on their terms. We understand those with unconventional income may not be able to provide “traditional” income documentation, like tax returns or W-2 forms.
This is the beauty of bank statement jumbo loans. With these non-qualified mortgages, borrowers can qualify using 12-months or 24-months of bank deposits as alternative documentation. This mortgage program is ideal for self-employed borrowers whose tax returns don’t reflect their true income, as well as real estate investors and foreign nationals seeking flexible loan options.
At mbanc, we have a unique understanding of how self-employed borrower businesses operate. To accommodate your circumstances, we take a granular financial qualification approach. Highlights of our bank statement jumbo mortgage program include:
-
Loan amounts up to $4 million
-
Unlimited cash-out refinance options
-
No W2, tax return, or pay stub requirements
-
40-year fixed or 30-year interest-only options
-
24- or 12 months of personal or 2 months of business bank statements
-
A minimum 660 FICO score requirement
-
Required down payment and payment requirements are flexible, but a larger down payment and strong liquid assets can improve your eligibility and loan terms
-
Eligible properties include both primary residence and investment properties
-
Bank statement loans can accommodate borrowers with recent credit events, such as a short sale or bankruptcy, and may be available to those with lower credit scores
Bank statement loans may have higher interest rates than conventional loans due to their flexible qualification standards and higher risk profile. It’s important to understand the key differences in loan terms, interest rates, and mortgage payments, including the option for making interest only payments, when comparing non-QM loans to conventional mortgage options.
Unlike conventional loans, bank statement loans do not require mortgage insurance, even with a lower down payment, and are not backed by the federal government or agencies like Fannie Mae or Freddie Mac. These are not conforming loans and do not adhere to conforming loan limits.
Bank statement loans help ensure borrowers can repay the loan by focusing on the borrower’s ability to repay through alternative documentation and a thorough review of finances, monthly debts, and debt to income ratio. Managing your finances and monthly debts is crucial when applying for a bank statement loan.
Conventional mortgage options, regulated by the Consumer Financial Protection Bureau, have stricter requirements for qualified mortgages (QM loans), including documentation, debt-to-income limits, and mortgage insurance. Bank statement loans, as non-QM loans, offer more flexible loan programs and loan options for borrowers who may not have perfect credit or meet traditional standards.
At mbanc, we offer a variety of loan programs and loan options to fit different borrower needs, and we pride ourselves on delivering a level of service that many lenders fall short of providing.
Self-Employed Mortgage Solutions for Real Estate Investing
Investing in real estate could help lay the foundation of true financial freedom. But conventional lenders have prohibitive requirements that make it inaccessible to those with an unconventional income. At mbanc, we understand that self-made people like you have succeeded on their own terms for years, and we celebrate you as the embodiment of the oft-vaunted American Dream. We offer two great financing options for you to consider: DSCR mortgages and jumbo loans.