SmartVest: Investor Cash FlowFor Experienced Real Estate Investors With Multiple Financed Properties And Complex Finances.
HIGHLIGHTS:
HIGHLIGHTS:
- Loan amounts up to $1.5M
- No TRID disclosure required
- DTI not calculated - use cash flow analysis
- No tax transcripts or tax returns required
- Debt coverage ratio = 1.0%
- Up to 15 financed properties
- 2 Years derogatory credit, 640 minimum FICO
- Fixed 30; ARM 5/1, 7/1, 10/1 – all optional Interest Only
The SmartVest Product is designed for borrowers who are experienced real estate investors looking to purchase or refinance an investment property that is held for business purposes. An experienced real estate investor is an individual who has a minimum of twelve (12) or more months with ownership and management of residential or commercial real estate. The borrower is qualified based upon the cash-flow of the subject property and is not required to provide additional employment or income related information.
Maximum Number of Financed Properties:
Borrower(s) may own no more than fifteen (15) financed properties including the subject property, unless the current principal residence is pending sale and meets the requirements of this product profile. The borrower may own additional real estate if it is owned free and clear. The following property types are not subject to these limitations, even if the borrower is personally obligated on a mortgage on the property:
Ineligible Transactions:
Unacceptable loan types include but are not limited to the following, provided, however, that in the event that any of these limitations would violate the requirements of the Equal Credit Opportunity Act or the Fair Housing Act, the provisions of those laws and implementing regulations are controlling: • Any loan that meets an agency, state or a federal definition of a high cost loan • High Priced Mortgage Loans (HPML) in the state of Connecticut (CT) • Cross-collateralization or Blanket loans, covering multiple properties • Bridge loans • Deed-Restricted Properties (exceptions will be considered on a case-by-case basis) • Lease-Purchase Options • Model Home Lease-Backs • Texas 50(a)(6) transactions • Mortgage Credit Certificates (MCC) • Temporary Buydowns • Land trusts • Leaseholds secured by Indian/Tribal lands • 1031 Reverse Exchanges • Loans to fund escrows for work completion except as provided in this guide • Loans to officers / owners of New Penn Financial’s approved mortgage brokers, correspondents. • Flip transactions (multiple private transfer in the last 12 months; see Property Flips for more details) • Refinancing of a subsidized loan, including loans subsidized by Habitat for Humanity, U.S. Department of Agriculture, FHA with a recapture or any city/county grant. • Borrowers with diplomatic immunity or otherwise excluded from U.S. jurisdiction. • Loans with any fraudulent activities including but not limited to straw borrowers, straw buyers, builder/seller bailout plans, multiple property payment skimming, which typically involves investors who purchase investment properties with seller carry back financing and collect rents but do not make the mortgage loan payments. • Foreclosure bailouts of any kind. (An arms-length purchase of a short sale is not deemed a foreclosure bailout.)
Borrower Eligibility:
Ineligible Borrowers:
Ineligible Property Types:
• Co-ops • Condotels • Leaseholds • Manufactured/Mobile, Modular, or Factory Built Homes • Agricultural properties such as working farms, ranches, or orchards • Log homes • Timeshares • Geodesic Domes, Berms, Earth homes, other Unique Properties • Properties with Excessive Acreage (> 20 acres) • Properties Purchased Through Auctions • Unimproved Land and property currently in litigation • Commercial Enterprises (e.g. Bed and Breakfast, Boarding House, Hotel) • Zoning violations including residential properties zoned commercial • Properties with less than 750 square feet of living area • Properties subject to oil and/or gas leases • Properties located in a Lava Zone • Properties located adjacent to or containing environmental hazards • Properties appraised with a property condition of C5 or worse
Income:
Income used to qualify the borrower is based upon cash flows from property owned using a Debt Coverage Ratio (DCR) calculation. • Employment and income information from the borrower is not to be provided. • A 4506T is NOT required in addition to any other employment rated income documentation. • Additional sources of income are not eligible to be used for qualifying purposes. Purchase Transaction: • Appraisal Form 1007 will be utilized to determine the monthly rent. Refinance Transaction: • The most recent lease agreement and Appraisal Form 1007 will be utilized to determine the monthly rent. • If the lease agreement reflects greater than market rents shown on Form 1007, then the lease agreement may be utilized as long as the lease is within 10% variance from the Form 1007. If the lease is > 10% variance, the underwriter must use Form 1007. • Short Term Leases – use leases used throughout the year and average over the 12-month period. If there are months where the property was vacant, use zero for that month in the average. The average should be supported by the comparable rent schedule within reason. o AirBNB, VRBO, and similar rental services are not acceptable. • An expired lease agreement that has verbiage that states the lease agreement becomes a month-to-month lease is allowed with proof of most recent month’s rental payment to the borrower. Debt Coverage Ratio (DCR) • The debt coverage ratio is calculated by taking 100% of the gross rents divided by the PITIA of the subject property • The following should be used to calculate the P&I of the subject property for purposes of determining the PITIA of the subject property: o Fixed Rate: Use the Note Rate o Adjustable Rate: ▪ 5/1 – Use the greater of the fully-indexed rate* or Note rate▪ 7/1, 10/1 – Use the Note Rate o Interest Only: Use the greater of the fully-indexed rate* or Note rate based on the scheduled remaining loan term at the time of recast after the interest only period has expired • Rents are derived from the lesser of the lease agreement or Form 1007 unless within the 10% variance listed above. • In order for the loan to qualify it must meet the following requirements: o DCR Purchase = 1.0 o DCR Rate/Term = 1.0 o DCR Cash-Out = 1.0 Debt Coverage Ratio Example(s): Gross Rent from Subject Property = $2,000 PITIA = $1,000 $2,000 gross rents divided by $1,000 PITIA = 2.0 DCR so the loan qualifies as 1.0 is the minimum DCR. Another example: Gross Rent from Subject Property = $2,000 PITIA = $3,000 $2,000 Gross Rent divided by $3,000 PITIA = .67 DCR so the loan does not qualify as 1.0 is the minimum DCR. Loans under the SmartVest Product are classified as business loans. Appendix Q and ATR Requirements do not apply.
Maximum Number of Financed Properties:
Borrower(s) may own no more than fifteen (15) financed properties including the subject property, unless the current principal residence is pending sale and meets the requirements of this product profile. The borrower may own additional real estate if it is owned free and clear. The following property types are not subject to these limitations, even if the borrower is personally obligated on a mortgage on the property:
- commercial real estate
- multifamily property consisting of more than four units
- ownership in a timeshare
- ownership of a vacant lot (residential or commercial)
- ownership of a manufactured home on a leasehold estate not titled as real property (chattel lien on the home).
Ineligible Transactions:
Unacceptable loan types include but are not limited to the following, provided, however, that in the event that any of these limitations would violate the requirements of the Equal Credit Opportunity Act or the Fair Housing Act, the provisions of those laws and implementing regulations are controlling: • Any loan that meets an agency, state or a federal definition of a high cost loan • High Priced Mortgage Loans (HPML) in the state of Connecticut (CT) • Cross-collateralization or Blanket loans, covering multiple properties • Bridge loans • Deed-Restricted Properties (exceptions will be considered on a case-by-case basis) • Lease-Purchase Options • Model Home Lease-Backs • Texas 50(a)(6) transactions • Mortgage Credit Certificates (MCC) • Temporary Buydowns • Land trusts • Leaseholds secured by Indian/Tribal lands • 1031 Reverse Exchanges • Loans to fund escrows for work completion except as provided in this guide • Loans to officers / owners of New Penn Financial’s approved mortgage brokers, correspondents. • Flip transactions (multiple private transfer in the last 12 months; see Property Flips for more details) • Refinancing of a subsidized loan, including loans subsidized by Habitat for Humanity, U.S. Department of Agriculture, FHA with a recapture or any city/county grant. • Borrowers with diplomatic immunity or otherwise excluded from U.S. jurisdiction. • Loans with any fraudulent activities including but not limited to straw borrowers, straw buyers, builder/seller bailout plans, multiple property payment skimming, which typically involves investors who purchase investment properties with seller carry back financing and collect rents but do not make the mortgage loan payments. • Foreclosure bailouts of any kind. (An arms-length purchase of a short sale is not deemed a foreclosure bailout.)
Borrower Eligibility:
- An individual who has a minimum of twelve (12) or more months with ownership and management of residential or commercial real estate
- Borrowers must be either a U.S. Citizens or a Lawful permanent residents of the United States
- All borrowers must have reached the age at which the mortgage note can be enforced in the jurisdiction where the property is located. There is no maximum age limit for a borrower.
- No more than 4 borrowers may be party to any transaction.
- First Time Home Buyers are not permitted
- Non-occupant Co-borrowers not permitted
- Living Trust / Inter Vivos Revocable Trust Only (must be reviewed/approved by Lender)
- Vesting as an Individual, Corporation, LLC, and Partnerships are permitted
Ineligible Borrowers:
- Borrowers without experience owning investment properties
- Non-Occupant Co-Borrowers / Co-Mortgagors / Co-Signers / Guarantors
- Borrowers with diplomatic immunity or otherwise excluded from U.S. jurisdiction
- Foreign Nationals
- Non-Permanent Resident Aliens
- First Time Home Buyers
Ineligible Property Types:
• Co-ops • Condotels • Leaseholds • Manufactured/Mobile, Modular, or Factory Built Homes • Agricultural properties such as working farms, ranches, or orchards • Log homes • Timeshares • Geodesic Domes, Berms, Earth homes, other Unique Properties • Properties with Excessive Acreage (> 20 acres) • Properties Purchased Through Auctions • Unimproved Land and property currently in litigation • Commercial Enterprises (e.g. Bed and Breakfast, Boarding House, Hotel) • Zoning violations including residential properties zoned commercial • Properties with less than 750 square feet of living area • Properties subject to oil and/or gas leases • Properties located in a Lava Zone • Properties located adjacent to or containing environmental hazards • Properties appraised with a property condition of C5 or worse
Income:
Income used to qualify the borrower is based upon cash flows from property owned using a Debt Coverage Ratio (DCR) calculation. • Employment and income information from the borrower is not to be provided. • A 4506T is NOT required in addition to any other employment rated income documentation. • Additional sources of income are not eligible to be used for qualifying purposes. Purchase Transaction: • Appraisal Form 1007 will be utilized to determine the monthly rent. Refinance Transaction: • The most recent lease agreement and Appraisal Form 1007 will be utilized to determine the monthly rent. • If the lease agreement reflects greater than market rents shown on Form 1007, then the lease agreement may be utilized as long as the lease is within 10% variance from the Form 1007. If the lease is > 10% variance, the underwriter must use Form 1007. • Short Term Leases – use leases used throughout the year and average over the 12-month period. If there are months where the property was vacant, use zero for that month in the average. The average should be supported by the comparable rent schedule within reason. o AirBNB, VRBO, and similar rental services are not acceptable. • An expired lease agreement that has verbiage that states the lease agreement becomes a month-to-month lease is allowed with proof of most recent month’s rental payment to the borrower. Debt Coverage Ratio (DCR) • The debt coverage ratio is calculated by taking 100% of the gross rents divided by the PITIA of the subject property • The following should be used to calculate the P&I of the subject property for purposes of determining the PITIA of the subject property: o Fixed Rate: Use the Note Rate o Adjustable Rate: ▪ 5/1 – Use the greater of the fully-indexed rate* or Note rate▪ 7/1, 10/1 – Use the Note Rate o Interest Only: Use the greater of the fully-indexed rate* or Note rate based on the scheduled remaining loan term at the time of recast after the interest only period has expired • Rents are derived from the lesser of the lease agreement or Form 1007 unless within the 10% variance listed above. • In order for the loan to qualify it must meet the following requirements: o DCR Purchase = 1.0 o DCR Rate/Term = 1.0 o DCR Cash-Out = 1.0 Debt Coverage Ratio Example(s): Gross Rent from Subject Property = $2,000 PITIA = $1,000 $2,000 gross rents divided by $1,000 PITIA = 2.0 DCR so the loan qualifies as 1.0 is the minimum DCR. Another example: Gross Rent from Subject Property = $2,000 PITIA = $3,000 $2,000 Gross Rent divided by $3,000 PITIA = .67 DCR so the loan does not qualify as 1.0 is the minimum DCR. Loans under the SmartVest Product are classified as business loans. Appendix Q and ATR Requirements do not apply.
