Mortgage and Portfolio Loan Guide

What is a Blanket Loan?

A blanket loan gives the opportunity for a growing real estate investor to bulk finance their portfolio. These investment property loans can be done on the purchase of new rentals, and refinance of existing property.

Great, but why would an investor want to have all or some of their rental properties wrapped up into one mortgage?

What is the advantage of a blanket loan?

In case you have been living under a rock since the crash in 2007, I’ll fill you in a bit on what’s it’s like to finance a rental property the old fashion way. (Don’t get me wrong, I love what I do, but the government regulation involved can be a bit daunting sometimes.)

When looking at getting investment property loans in the mainstream mortgage market, here are some challenges that are often faced:

  • Personal income issues
  • Personal credit issues
  • Number of financed properties
  • Property type restrictions
  • Property condition issues
  • The list goes on

What it boils down to is that the mortgage world is extremely regulated. From having to re-disclose a loan package within a certain number of days every time a loan officer sneezes, to having to get a letter of explanation for nearly every life event in the most previous two years. Okay, that might be a bit of an exaggeration. But the point is, getting a regular mortgage is not as simple as it once was.

So imagine getting 5, 10, 15 loans individually within a 3-6 month period. That means your entire portfolio is re-reviewed each time, possibly by a different underwriter.

Yeah, no thanks.

For bulk scenarios like this, a blanket loan is probably the best option in terms of sanity and simplicity.

Sanity; because it’s all done in one approval process.

Simplicity; because the approval is based on property cash flow and equity, NOT personal income and credit (although good credit is always helpful when being considered).

This is a commercial loan, so the property performance is evaluated more heavily than the investor’s personal situation.investment property loans

Typical requirements on a blanket loan.

  • At least 5 properties included in the loan.
  • Minimum loan amount is usually 300K.
  • Rental income must cover payment as well as other expenses like taxes, insurance, association dues, etc. Up to 20% vacancy factor may be applied.
  • Units must be 90% occupied.
  • No vacation rentals. Minimum leases need to be at least 6 months in length.
  • Close in an LLC.
  • Must have at least 2 years property management experience.

Of course, there are more guidelines in order to qualify. Every deal is evaluated individually, this is meant to give a brief snapshot of what to expect.

Typical structure of a blanket mortgage.

  • Maximum 75% loan-to-value.
  • Can be done on purchase, rate and term refinance, and cash-out refinance.
  • Typically done on 5 or 10 year balloon (amortized over 30 years).
  • 30 year fixed available in some cases.

How to apply for a blanket loan?

You can start by filling out this rent roll. By completing it in full you’re really able to provide a full picture for the potential deal to be evaluated and priced out. Depending on the complexity of the scenario it can take 48 hours to a week to get a response on if it can be done and what the terms might look like.

At that point, you can review the blanket structure and decide if this type of loan meets your needs.

What are some alternatives to bulk financing?

Full doc loan

This is where your income/credit/assets are evaluated in full. This can be done on a case-by-case basis up to 10 properties financed (down payment and pricing varies after 4 properties are financed).

The concern with going this route is that the properties you are potentially buying or refinancing might recently bought/renovated/flipped. When dealing with flips, it can be tricky to get an acceptable value (example: it was bought 3 months ago for 20K, renovated, and now is being sold for 110K). That’s an extreme example, but the point is that it can be a challenge to have acceptable value on collateral if the price isn’t justified in detail. Yes, that can be a challenge in any scenario, but when you’re doing a full doc loan it can be even more of a hurdle.

When looking at these opportunities, be sure to get info on when the properties were purchased. If they were originally purchased at heavy discount within the last 12 months then it would be good to know exactly what renovations were made so that value can be justified.

Individual Investor Cash Flow Loan

These loans are designed to cater to investors who would prefer a more simplified approach when it comes to approval.

Credit is pulled, we do verify assets, but we do not get docs on your personal income (no tax returns, no paystubs, etc). The deal is evaluated on the cash flow of the property and equity. We can go up to 80% LTV on these (on a 15 year fixed), or up to 75% LTV (on a 7/1 ARM or 5/1 ARM). The 15 year fixed is a nice option, but it can have an impact on the cash flow, so it doesn’t always work out when structuring it on a 15 year.With this type of loan there is no max number of financed properties.

For cash flow we take into consideration the current lease on the property (if applicable), and we get a 1007 rent schedule completed by the appraiser to tell us what the fair market rent is. From there we factor in mortgage payment, taxes, insurance, and homeowners association dues (if applicable). If the fair market rent covers those items and other annual expenses when applicable, we’re good (minus 20% vacancy factor). [more on this here]

Keep in mind

that there are typically reserve requirements in most cases. “Reserves” as in liquid assets left available after down payment, costs, escrows are paid at closing. Typically you’ll need 6-12 months reserves for the subject property. Example: the payment on the subject property is 950/month, you’ll likely need 11,400 in reserves.

In some cases, in addition to the reserve requirement on the subject property, you’ll need an additional 2 months reserves for all other financed properties. I think it’s imperative to communicate this because the reserve piece is often ignored by many investors. You obviously don’t want to overextend yourself when making a purchase, and disregard the need for reserves. When that happens, things tend to fall apart.

Pay cash

Liquidate your assets and run the show. Even well healed investors don’t typically pay cash unless they have to because, as they say, cash is king. When you use up a substantial percentage of your funds to acquire a property, the pressure tends to be more stressful.

Hard Money Loan

These are great options if the property is in serious disrepair or if you need access to capital quickly. The luxury of speed typically comes with an aggressive price up front and monthly.

There are a number of ways to acquire more real estate and grow your portfolio. A blanket loan is just another tool in the box to help accomplish your goals.

They aren’t for everyone, but a blanket mortgage does prove to be a valuable resource for many growing real estate investors.

I invite you to reach out.

portfolio mortgage lendersIf you’re an investor, or you work with real estate investors, feel free to reach out to me directly to get your questions answered.

If I’m unable to help, I can most likely point you in the right direction at the very least. All the best!

 

investment property loans


Best Investment Property Loans

Let me be clear. When I say that these best investment property loans (portfolio loans) are ridiculous, I don’t mean that in a negative way. I say it from a ridiculously awesome standpoint.

Simply put, the residential mortgage guidelines have made things a bit difficult for real estate investors to grow their portfolio. But it doesn’t have to be that way anymore…

The Problemmortgage for rental property

When real estate investors are looking for a mortgage for rental property, and they already have several mortgages on investment properties, conventional guidelines say they cannot finance more homes for investment purposes.

Some lenders will allow up to 10 financed properties.

Some lenders will allow up to 20 financed properties (rare).

Most of the time, that’s only allowed if the home that you’re looking to buy is going to be your primary residence. So most investors with a portfolio of financed real estate are kind of stuck if they want to acquire more property.

The Solution

Real Estate Investment Loans, also commonly known as a portfolio loan.

These loans are designed to cater to the real estate investor who would rather not liquidate their reserves to purchase more real estate. This is specifically, a perfect mortgage for rental property.

5 Reasons the new Best Investment Property Loans are a Life Changer

No income is reported on the loan application.

The borrower is not qualified based on their employment. Think about it, if you’re buying a rental property, would you be making the payments on that loan from earned income? Heck no.

The tenant will be making the payment for you. That’s why you got into the real estate investing business to begin with. To get into an appreciating asset that pays for itself. It makes sense to approve an investment property loan based on the cash flow of the property. (see below for how the expected property cash flow is determined)

No maximum number of financed properties.

This one is huge. Why? Because so many real estate investors tend to hit a road block when they hit 10 financed properties.

Most think that at that point, their only option is to get a hard money loan (super high rate, very short term, paying several points). The good news is that Investment Property Loans (portfolio loans) are available, and common sense approvals exist.

Not nearly as many insane government guidelines.

These rental property mortgages are not treated like normal residential mortgages which are (what some would call) over-regulated.

Why?

Because these homes are being purchased for business purposes, and are treated more like how commercial loans are treated (approving the scenario based on potential cash flow and equity instead of borrower employment status). Why does this matter? Well, if you are reading this, I’m going to go ahead and assume you’re aware of the extremely strict guidelines in place that prevent many good people from buying a home because of a simple technicality.

Bottom line, government regulation involving home ownership has gotten tough, with investment property loans it’s not quite as bad.

Not necessary to put half down.

This is another reason its a great time to get a mortgage for rental property if you have a high number of investment properties already financed. You DON’T have to put 40-50% down to make it work. In many cases 20% down is acceptable. Obviously credit score and loan size will have an impact on required amount down. [Just ask me, I’ll let you know]

Not necessary to have perfect credit.

Let’s face it, life happens. Unforeseen tragedies happen that result in painful credit repercussions.

You shouldn’t have to wait 7 years in order to be able to get back into the real estate investing world. In many cases these are doable if at least 2 years have passed since a major credit issue (bankruptcy, foreclosure, short-sale). It wouldn’t be a bad idea to be at least 600 credit before applying.

If you’re not at 600 credit score yet, here is a great free tool to help yourself out when it comes to improving your credit score.

 


Loan Approval Based on Property Cash Flow | Best Investment Property Loans

Circling back to the comment above about no income being disclosed on the loan application.

No. We’re not getting back to the old days when anyone with a pulse is approved for a mortgage. These loans are fully underwritten and evaluated for ability to repay the loan.

But the ability for the loan to be paid lies within the monthly liability (mortgage payment/taxes/insurance/association dues) in relation to the fair market rent.

So how is fair market rent evaluated?

Pretty simple really. If you’re purchasing an investment property, the appraiser will do a standard 1007 rent schedule (or something similar) to calculate fair market rent for the lender. The lender will then take a percentage off of that amount (to account for possible vacancies).

If you already own the property, and are refinancing, the current lease will be evaluated as well as a 1007 rent schedule to be completed by appraiser.

A Huge Win for Non-Warrantable Condos

Investors who have been looking to buy non-warrantable condos have been having a tough time. They usually have to buy the property cash, or get a hard money loan. With investment property loans that’s probably not going to be necessary if the association is established and the phase is complete.investment property loans

A big problem with investing in condos right now is that the complex can be deemed “non-warrantable” due to a number of circumstances. [more about non-warrantable condos here]

Most of the time condos are labeled non-warrantable because the percentage of units owned for rental purposes is higher than what’s usually acceptable. This is when getting a mortgage for rental property is a great tool to have. The complex will be evaluated and a common sense decision will be made.

The complexes aren’t always approved, but it’s a great opportunity to explore if you’re and investor running into the non-warrantable condo issue.

Keep In Mind

  • Minimum Credit Score 600
  • Down Payment 20% minimum
  • Minimum loan amount $75,000
  • Must be at least 2 years out of major credit event (foreclosure/short-sale/bankruptcy)
  • Approval is based on property cash flow, not personal income

Experience is Requiredrefinance rental property

As I mentioned previously, these real estate investment loans are designed for folks who have been investing for at least 6 months.

Perfect for investors who are running into issues with hitting maximum number of financed properties.

Be prepared to provide legitimate evidence that you have been a real estate investor for at least 2 years. The ability to repay the loan is tied to your ability to manage the property effectively.

If you are fairly new to real estate investing, it will probably be best to get a normal conventional loan.

I invite you to reach out.

portfolio loans

If you are looking for the best investment property loans in your market I encourage you to reach out to me to see I might have the right fit for you.

You will not be redirected to some intern in a call center. You will connect with me directly.

If for some reason I am unable to assist, I will most likely be able to point you in the right direction at the very least.

 

real estate investment loans

Investment Property Loans | Portfolio Loan for Real Estate Investors


What is a Portfolio Loan?

Here’s the deal… there is no such thing as a cookie cutter scenario when it comes to home financing. Whether it’s FHA, Conventional, Jumbo, VA, USDA, etc… everyone’s situation is different. If you do not qualify for traditional financing a portfolio loan may be your ticket to mortgage approval.

Portfolio loans are a step beyond unique.

What is a portfolio loan?

Portfolio loans are designed to get folks approved when they are not eligible for any “normal” type of financing.

These types of mortgages are commonly funded by small banks or credit unions, and are kept in their “portfolio”. The reason portfolio loans are typically found at local banks or credit unions is simply because these companies are more home-grown than your common mega lender. They have every reason to help their local economy grow. They know that if they give a borrower a chance when no one else will, they will be a loyal client for life.

Small banks and credit unions are built more around relationships than any lender you’ll find. They are willing to take the risks because they look at the whole picture of a borrower’s situation.

Getting a portfolio loan is more of a common sense type of approach to mortgage lending, unlike your conventional/FHA mortgage that is pretty much a check-in-a-box, black and white type of approval process. With a portfolio loan, the story matters.

When is a portfolio loan necessary?

portfolio loan past credit issuesRecent Credit Issues

Many times a portfolio loan is called for when a borrower has damaged credit. Maybe their credit was ruined because of a nasty divorce. Maybe their credit was ruined due to an injury. This would have an impact on their ability to earn for 12 months.

Sometimes this forces foreclosure, possibly bankruptcy. Really any situation where the borrower was in a rough patch, but now is back on their feet.

You see, with any normal type of mortgage, there is a waiting period you have to meet before being able to buy a house. Usually it’s at least 3 years before you can do anything if there was a recent bankruptcy or foreclosure. But should it really be that way if the situation was truly temporary, and the borrower is back on their feet? The answer is no. The result, Portfolio Loans.

Examples of recent credit issues:

  • Bankruptcy
  • Foreclosure
  • Short-sale
  • Ex-spouse ruined credit during nasty divorce
  • Piled up medical bills
  • Misc. collections
  • Tax lien
  • Judgment
  • Low credit scores due to high credit card balances
  • Late payments in last 24 months

Unique Property Type

Sometimes the property that the borrower is looking to buy or refinance is particularly unique. So unique that it does not meet the necessary guidelines to be eligible for conventional, FHA, etc. financing.portfolio loan unique property

This is common with condominiums because the homeowners association gets a full review by the lender to determine its financial stability. Many times condos are deemed “non-warrantable” because the complex or homeowners association does not meet the Fannie Mae, Freddie Mac, or FHA condo guidelines. [full article on Non-Warrantable Condos here…]

Examples of why condos are sometimes deemed as non-warrantable:

  • Homeowners association has a lack of reserves
  • Inadequate insurance coverage
  • Inadequate flood insurance coverage
  • Too many units are tenant occupied (renters)
  • The complex is under construction or in a phase that calls for more construction
  • Too many units are owned by 1 person or entity (investor owns high percentage of units)

Other unique properties that may call for a portfolio loan:

  • Commercially zoned property that is being used as residential
  • Berm home
  • Log cabin (if not typical in the market)
  • Any type of home that an appraiser has a difficult time finding comparables for (recent sales of similar homes)

Foreign Nationals

When folks move to the US and want to buy a house right away, they are commonly faced with 2 major problems: they don’t have credit established in the United States, and they do not have income established in the United States.

This is a perfect opportunity to pursue a portfolio loan. There are some main things the borrower would want to provide if they are a looking to get a portfolio loan, and are new to the United States.

A foreign national would want to provide:

  • Type of VISA, and all VISA applicable documentation
  • Previous 2 year income history in previous country (paystubs/tax returns)
  • Asset statements
  • Letter explaining intent to stay in the US
  • Proof of income established in United States (employment letter, paystub)

Investment Property Loans | Approval Based on Property Cash Flow

Most real estate investors reach challenges when attempting to expand their real estate portfolio, and are looking to finance those new investments. The general investment property loansassumption is that their only option is to get a hard money loan or buy the new home cash.

That is not true in this market. With a portfolio loan, you can have an unlimited number of financed properties. What’s more is that these types of scenarios are approved based on property cash flow, not borrower income circumstances.

That would make sense wouldn’t it?

To approve the property based on cash flow? Since the rental income will be paying for the mortgage/taxes/insurance/association dues, the deal is evaluated based on fair market rent. These are done on purchase, refinance, and cash out refinance loans.

These types of rental property loans are phenomenal for seasoned investors who are looking to grow their real estate portfolio. [full article here…]

Unique Income Circumstances

We often see borrowers that are financially stable, have great credit, solid assets, but don’t qualify for a mortgage due to a simple technicality regarding their income situation. This is another great opportunity to explore the possibility of getting a portfolio loan.

Keep in mind, portfolio loans are not necessarily “stated income” loans, where the borrower tells the lender how much they make, and all is well (like the old days before the housing meltdown). Portfolio loans are still full documentation loans, but are looked at from a common sense standpoint.portfolio loan unique income

For example, let’s look at 1099 employee. These are folks that typically are considered “private contractors” and are given a 1099 at the end of the year to show earnings (instead of a W-2 like most employees). In this case, lenders need a 2 year history receiving that type of income. The reason for that is 1099 employees will sometimes have some unique write-offs on their tax returns that could possibly have an impact on what their actual net earnings are.

The problem with this is that many times 1099 employees are paid on a salary or set amount of income for a set amount of time. So basically, the borrower is guaranteed $X for the next X number of months, but can’t use that income to qualify because they don’t have a 2 year history of being a 1099 employee? Does that make sense? Heck no! Especially if that individual has worked in that same line of work in the past and has a degree in that field.

The reality is that these scenarios are fairly common, and people think they are stuck until they get a breath of fresh air (portfolio loan).

Bank Statement Loan | Self-Employed Borrowers

If you are a business owner and have significant write-offs that your CPA helps you take advantage of (most business owners), a bank statement loan program may be the best solution for you. With this type of portfolio loan, your approval is NOT based on your tax returns.

Your income is calculated based on 24 months bank statements (12 months on case by case basis). You can use personal or business bank statements depending on your scenario. You must be self-employed with the same business for at least 2 years. [full description here]

If you are looking for a second chance…

A portfolio loan could be the perfect fit for you. I talk with folks every single day, all over the country, who are seeking a common sense type of approach to mortgage approval. If I am unable to help, I usually can point them in the right direction at the very least.

You won’t be talking with my assistant, or some loan officer who is dabbling in mortgages. You’ll be talking with me directly. If I can help, awesome. It will be an honor. If I can’t help, I’ll do everything I can to connect you with the right lender so that you can accomplish your specific home ownership goals.

Main items to keep in mind when seeking a portfolio loan:

  1. Available on purchase or refinance.
  2. At least 10% down (no PMI).
  3. Down payment may be gifted if you have at least 5% of your own funds.
  4. Income and assets must be verifiable.
  5. Primary residence, second home, and investment property options available.

 

portfolio loans

I invite you to reach out to me.

Get your questions answered.

 

pre approved home loan

If you or your clients are in any type of unique scenario, please feel free to reach out to me directly for an opportunity to get approved for a portfolio loan. 248-894-2763


 

What is a portfolio loan?

Adam Lesner | NMLS 198818 | Troy, Michigan

Michigan, Massachusetts, and Florida. Also offering financing in most states across the US including (but not limited to) Georgia, North Carolina, South Carolina, Alabama, Arizona, California, Colorado, Delaware, Washington DC, Illinois, Indiana, Iowa, Kentucky, Louisiana, Maryland, Minnesota, Missouri, Ohio, Oklahoma, Oregon, Tennessee, Virginia, Wisconsin.