Financing is the most asked topic we get from investors in our community. Today I want to share about how to overcome any financial challenge that comes your way.
Let’s dive in:
Most conventional lenders use a debt-to-income ratio (or DTI) as part of their loan approval process. And you know we rave about working with Cody Touchette and his team at Caliber Home Loans.
But, not all investors fit into the conventional lending box, as they have strict guidelines to adhere to. This means you might not qualify for financing if your DTI percentage is too high, if you’ve recently changed careers, or if you are over the maximum allowed ten conventional mortgages.
If any of the above is true for you, I recommend using an asset-based lender instead.
Asset-based lenders use debt service coverage ratios instead of debt-to-income ratios. Meaning they don’t look at any personal debt you may have.
Instead, they look at the ratio of net operating income of a property you’re purchasing and the new debt service (principal and interest payment).
They focus less on qualifying the individual and more on qualifying the property for financing. In fact, you could qualify for a loan in some cases and not even have a job or income.
I personally recommend Certain Lending as an asset-based lender. They service over 40 different states and it only takes a few minutes to apply.
But in the meantime, here’s a few criteria to keep in mind when you’re in the financing stage:
Struggling with a high DTI ratio? Choose a lender who offers loans based on DCR, such as Certain Lending.
Are you recently self-employed? Work with a DCR lender who can get around the 2 years of tax returns requirements.
Lacking the required down payment? Bring on a partner and find a lender who works in these types of situations.
Now that you’ve learned about asset-based lending , there should be nothing in your way of building the portfolio that will set you free.