Rental Loan FAQs
Frequently Asked Questions
Common questions about Rental Loans
1. What types of property will you provide rental financing for?
- Single-Family 1 – 4 Units
- Condominium Units (Warrantable and Non-Warrantable)
- Mixed Use
- Multi-Family 5 – 40 Unit
2. What is your minimum and maximum loan for each property type?
|Single-Family 1 – 4 Units||$50,000 – $750,000|
|Condominium Units (Warrantable and Non-Warrantable)||$50,000 – $750,000|
|Mixed Use||$75,000 – $5,000,000|
|Multi-Family 5 – 40 Units||$150,000 – $5,000,000|
3. What type of loans do you provide on rental properties?
- Purchase (Rate and Term) – new purchase or vacant property owned for less than 6 months. Up to 80% LTV or 80% of purchase price (whichever is lower)
- Refinance Loan (Rate and Term) – Up to 80% LTV.
- Refinance Loan (Cash-Out) – Up to 75% LTV.
4. Will you allow the owner / borrower to occupy the rental?
- No. We only provide non-owner occupied rental loans for our borrowers.
5. What amortization period(s) do you provide your borrowers?
- 15-Year Fully Amortizing Fixed Rate
- 30-Year Fully Amortizing Fixed Rate
6. What kinds of interest rate products do you offer your borrowers?
- 15-Year Fixed Rate
- 30-Year Fixed Rate
- ARM: 5/1, 7/1, 10/1
- ARM Interest Only: 5/1, 7/1 and 10/1
7. Do you charge prepayment penalties if I pay off my loan early?
- Single-Family 1 – 4: 3-2-1 [3% Year-1, 2% Year-2, 1% Year-3]
- Mixed Use: 3-3-3 [3% Year-1, 3% Year-2, 3% Year-3]
- Multi-Family: 3-3-3 [3% Year-1, 3% Year-2, 3% Year-3]
8. Do you require personal guarantees on each rental loan?
- Yes. A personal guarantee is required from the party whose credit score is being used for the loan; this person must own 20% or more of the borrowing entity. Additional guarantors must also own 20% or more of the borrowing entity.
9. Do I have to be a U.S. Citizen to obtain a rental loan?
- No. We will consider loans to foreign nationals on a case-by-case basis. However, the maximum loan provided to a foreign national entity or guarantor will be 65% of ARV.
10. What kinds of borrowers are eligible to obtain a rental loan?
- Sole Proprietorship
- LLC, LP, LLP and LLLP
- Corporations (C- and S- Corps)
- Series LLC*
- Revocable Trusts*
- Community Land Trusts*
*Subject to review and approval
11. What kinds of borrowers are ineligible to obtain a rental loan?
- Irrevocable Trusts
- Joint Ventures
12. Will you provide wrap financing, 2nd lien financing or any kind of subordinate financing if I have a 1st lien in place already?
- No. Subordinate financing under any circumstance is not allowed.
13. What is your maximum loan to value (LTV) for any given rental loan?
|Loan Type||Purchase (Rate % Term)||Refinance (Rate & Term)||Refinance (Cash-Out)|
|LTV||Up to 80%||Up to 80%||Up to 75%|
14. Am I guaranteed the maximum LTV or LTC for each rental loan?
- No. We make the following adjustments to our maximum LTV / LTC commitments.
|Adjustments to Maximum LTV/LTC|
|Cash Out Refi:||-5% LTV||75% LTV Maximum|
|Derogatory Credit ≤ 4 Yrs:||-5% LTV||70% LTV Maximum|
|Gifts of Equity:||-5% LTV|
|2 to 4 Units:||75% LTV|
|5 to 40 Units:||70% LTV|
|Property Value < $100,000:||70% LTV|
|Specific States’ Limits:||70% LTV||FL, IL, IN, MA, MN, NJ, NY, OH, PA, WI|
|Warrantable/Non-Warrantable Co:||75% / 65% LTV Maximum|
15. Do you pull credit on each guarantor?
- Yes. We pull credit on parties owning 20% or more of the borrowing entity or for parties having a controlling interest in the borrowing entity.
16. When you pull credit, is it a soft-pull or a hard-pull on my credit profile?
- When we pull credit on each guarantor, it is a hard-pull, tri-merge credit report from Equifax, Experian and TransUnion. We will take the middle score of the 3 reports. If all three reports do not exist or do not provide a sufficient credit profile, we will take the lower of the 2 sufficient reports
17. What if my partner and I are equal owners of our entity, but my score is higher than my partners? Will you use the higher score or the lower score or an average of the scores for each?
- In the case of multiple guarantors, we will take the higher of the scores to price the loan.
18. Do you require background checks?
- Background checks are subject to the Office of Foreign Asset Control (OFAC) compliance, credit or for identity verification purposes.
19. What if I have declared bankruptcy or had a property foreclosed upon while I was the guarantor or borrower?
- If you have declared bankruptcy or been foreclosed upon in the last 24 months from closing, you are ineligible for a rental loan.
- If you have declared bankruptcy or been foreclosed upon more than 24 months from closing, you are eligible for a rental loan. However, the LTV will be reduced to a maximum of 70%, we will require an additional 6 months or PITI reserves and verification that you have not been 30 days late on the subject mortgage in the last 12 months (if applicable)
20. I am an active investor and have many loan commitments on rental property, commercial property and fix-and-flip property, are there any restrictions on my ability to get a rental loan with you if this is the case?
- No. However, you must be current on all mortgages or loan commitments in the last 12 months for us to consider providing you with another loan.
21. What if I have a tax lien on an investment property or personal property?
- If you have a tax lien on any property for which you are the sole guarantor, co-guarantor or otherwise, you are ineligible for a rental loan.
22. Do you require income verification or is your lending decision based upon stated income?
- Stated income.
23. What kind of liquidity do you require from your guarantors?
- Guarantors must have aggregate liquidity reserves as follows:
|≤ $1,000,000||$1,000,001 to $1,500,000|
|3-month PITI reserves||6-month PITI reserves|
|12 mo PITI reserves if any 1 borrower is Foreign National|
|Reserves = 1% of the UPB on all mortgages reported on credit (not including subject property)|
24. Do you require an appraisal for each rental loan?
- Yes. We require an as-is appraisal with an accompanying Form 1007 Schedule of Rents.
- All appraisals must be performed by a qualified appraiser.
25. Do you perform any valuation analysis beyond an appraisal?
- Yes. We will perform our own automated valuation model (AVM) or desktop review (DR). If our AVM or DR value is 20% less than the as-is appraisal, we will require a 2nd full as-is appraisal be completed by a qualified appraiser. The lower of the two appraisals will be used to determine value on the subject property loan.
26. Do you require an environmental study?
- No. But, we do require the guarantor(s) / borrower(s) to sign an environmental indemnity agreement.
- At our discretion, we may require environmental insurance or request that a Phase I environmental survey be conducted on the subject property.
27. What is your minimum debt-service-coverage-ratio (DSCR)?
|Single-Family 1 – 4 Units||1.00x|
|Condominium Units (Warrantable and Non-Warrantable)||1.00x|
|Multi-Family 5 – 40 Units||1.25x|
28. Do you use a vacancy factor when calculating the DSCR?
- Yes. A 5% vacancy factor is applied to gross income for all property types.
29. How do you calculate DSCR?
- ((Gross or Market Rent x 95%) – Monthly Taxes – Monthly Insurance – Monthly HOA Dues) / Monthly Principal & Interest Payment
30. What if I just purchased the property with a hard money loan and I am rehabbing the property prior to leasing it out to a tenant? Can I take out my hard money loan with a rental loan?
- Yes. You can take out your hard money loan with a rental loan; however, there is a seasoning requirement. You must have owned the property for a minimum of 90 days, and it must be occupied (with a lease agreement in place) at the time of application for the rental loan.
31. What if I am applying for a Cash-Out Refinance, is there a seasoning requirement?
- Yes. You must have owned the property for a minimum of 180 days (6 months), and it must be occupied (with a lease agreement in place) at the time of application.
32. What documentation is required for a rental loan?
- Completed Property Application
- Borrower Identification: Driver’s License, Passport, Resident Alien Registration Card
- Articles of Incorporation / Organization
- Operating Agreement or Stock Certificate with Corporation By-Laws
- Certificate of Good Standing / Certificate of Foreign Qualification
- Federal EIN Registration & IRS EIN Tax-ID Registrations for all entities or parties involved in the transaction.
- 2 Months of Asset Statements: Any account with individual deposits that exceed 50% of the ending balance or deposits that exceed $10,000 should include a letter of explanation.
- Letter of Explanation for Cash-Out Financing
- Real Estate Background Narrative: Brief explanation of real estate history and experience for loan requests of $1,000,000 or more.
- Purchase Contract
- Assignment Contract if property was assigned.
- HUD 1 Settlement Statement or State Equivalent showing purchase (if owned less than 12 months)
- Lease agreement for all tenant occupied units.
- Loan Payoff Information (Refinance Only)
- Hazard Insurance
- Additional documentation may be requested based on loan review at underwriter’s discretion.
33. Can I use equity in my property to meet cash reserve requirements?
- Yes, this is possible on a Cash-Out loan where the property has enough equity and borrower meets other loan qualifications.
34. What are your fees / closing costs?
- Origination Fee – 2% or 200 bps of the loan commitment
- Processing /Application Fee – $995
- Document Preparation Fee – $200
- Appraisal Fee / Cost – Market Pricing