Industry update - investment property financing

Your investor client may not need 25% down

A conventional path to a non-owner-occupied purchase with as little as {{product.downMinOneUnit}} down and no mortgage insurance. It fits a narrow client profile - here is how to spot one.

Equal Housing Opportunity {{compliance.pendingLabel}} updates.patricknorman.net

The whole program on one slide

The fit screen

GateOne unitTwo to four units
Max LTV / CLTV{{product.ltvMaxOneUnit}}{{product.ltvMaxMultiUnit}}
Minimum down payment{{product.downMinOneUnit}}{{product.downMinMultiUnit}}
Min LTV / max down payment{{product.ltvMin}} LTV, so no more than {{product.downMaxEligible}} down on any unit count
Max DTI{{product.dtiMaxOneUnit}}{{product.dtiMaxMultiUnit}}
Minimum FICO{{product.ficoMin}}{{product.ficoMin}}
Mortgage insurance{{product.miRequired}}{{product.miRequired}}
OccupancyInvestment property, purchase only
Terms{{product.terms}}
Loan amount{{product.loanMin}} minimum, up to {{product.loanMaxRule}} of {{product.loanHardCap}}

Available for locks beginning {{product.lockAvailableFrom}}.

The counterintuitive part

There is a minimum loan-to-value

Every guideline you have ever read sets a ceiling on how much a buyer can borrow. This one also sets a floor. Minimum LTV is {{product.ltvMin}}, so the loan has to be more than 80% of the purchase price for the file to be eligible at all.

  • Buyer putting between {{product.downMinOneUnit}} ({{product.downMinMultiUnit}} on two to four units) and {{product.downMaxEligible}} down? This program is on the table.
  • Buyer putting {{product.downIneligibleAt}} or more down? Not eligible. That file goes to standard agency financing instead.
This is a door that only opens when the buyer is putting less than {{product.downIneligibleAt}} down. More money down does not make the file stronger here. It makes it ineligible.
Minimum LTV {{product.ltvMin}} Ceiling as well as floor: {{product.ltvMaxOneUnit}} on one unit, {{product.ltvMaxMultiUnit}} on two to four. And the usual trade for crossing 80% does not apply. Mortgage insurance: {{product.miRequired}}.

Credit and capacity

A high, fixed credit bar

Minimum representative score {{product.ficoMin}} The representative score is the lowest middle score of each borrower. Scores do not average. Adding a weaker co-borrower pulls the qualifying score down to theirs.
  • Non-traditional credit is not acceptable on this program, and every borrower needs at least one FICO score of their own.
Maximum DTI {{product.dtiMaxOneUnit}} on one unit, {{product.dtiMaxMultiUnit}} on two to four Set by the automated findings and capped by the program, whichever is tighter.
Expect to hear the word "Ineligible." Accepted findings are {{product.ausAccepted}}. Agency caps investment purchases below this LTV, so an Ineligible finding here is the expected result of exceeding an agency limit, not a defect in the file.

Cash to close

The down payment has to be the buyer's own money

On a normal conventional purchase, help from family is routine. Not here. This is the single assumption most likely to blow up a deal after it is already under contract, so ask before the offer goes out.

Gifts are not permitted

  • No gifted down payment and no gifted reserves.
  • If the plan is "my parents are helping with the down payment," this is not the program. That buyer belongs on standard agency financing with a larger down payment.

Sweat equity is not an eligible asset

  • Work the buyer intends to perform on the property does not count toward the funds they need.
  • Interested party contributions follow standard agency limits and do not fill this gap.
Down payment and reserves both have to come from the buyer's own documented funds.

Reserves

{{product.reservesSubject}} on the subject, plus a slice of the portfolio

Reserves are the money still standing after the down payment and closing costs. This program asks for two layers of it.

LayerRequirement
On the subject property{{product.reservesSubject}}
Plus, across the portfolio (one tier only){{product.reservesTierOne}}
or{{product.reservesTierTwo}}
or{{product.reservesTierThree}}

Aggregate UPB is the combined unpaid principal balance of the borrower's financed properties. Exactly one portfolio tier applies, picked by that property count - the three tiers are alternatives, not layers that stack.

Worked example A buyer with three financed properties Needs six months of reserves on the new property, plus 2% of the total unpaid balance across the portfolio. The second layer scales with how much the buyer already owns, which is why the fourth purchase reserves more easily than the seventh.
Reserves are the quiet reason these files fall apart. The buyer has the down payment and nothing behind it. Ask what is left over, not just what is available.

Using the rent to qualify

Rental income has an ownership prerequisite

Rental income otherwise follows agency guidelines, with one hard addition: each applicant must already own a primary residence in order to use rental income from the subject property to qualify.

  • The rentvestor does not fit. A buyer who rents where they live and is buying a rental as their first property cannot lean on the subject's rent, no matter how good the lease looks.
  • Short-term rentals are not allowed. If the plan is nightly or weekly bookings, screen it out now rather than at underwriting.

For the income file: a Request for Verification of Employment (Form 1005) is not accepted on its own. The most recent paystub or W-2 covering the most recent one-year period is required.

The question to ask first "Do you own the home you live in?" If the answer is no and the deal only works with the subject's rent counted, stop here.

Property and appraisal

A full appraisal, every time

  • Full interior and exterior appraisal, plus a Comparable Rent Schedule (Form 1007 or 1025). No appraisal waivers - PIW and ACE are not permitted.
  • A 120 day shelf. The effective date must be within 120 days of the note date. Past that it is a new full appraisal; a recertification of value will not rescue it.
  • Condition and quality are gates. C5, C6, and Q6 ratings are ineligible, so a rough fixer can fail on condition even at a supportable price.
  • Value gets checked twice. Every property requires valuation support, and a weak or indeterminate review can force a field review or a second appraisal, with the lower value controlling.

Ineligible property types (partial list)

  • Manufactured and mobile homes
  • Cooperatives
  • Properties held in community land trusts
  • Working farms and ranches
  • Unique properties without like-kind collateral, including dome homes and earth or berm homes
  • Anything located in Puerto Rico

Ineligible as a loan condition rather than a property type: files carrying an escrow holdback.

Closing mechanics

This one signs in wet ink

Plan the closing table the old way. The shortcuts that have become routine on agency files are all unavailable here.

  • No remote online notarization.
  • No eClosings and no hybrid closings.
  • Wet signing, in person. For an out-of-area investor, put the travel into the contract dates when you write the offer.
Also worth knowing Escrow accounts are required Narrow exceptions: California up to 89.99 CLTV, and anywhere state law requires the waiver. Flood insurance premiums paid by the borrower must be escrowed regardless of LTV, unless an association pays the flood premium for the group.

Structure limits

What this loan cannot do

  • Purchase only. No rate and term, no cash out. A client who already owns the rental cannot refinance into this.
  • {{product.terms}} only. No adjustable rate options.
  • No subordinate financing. CLTV equals LTV, so a seller second or a simultaneous second is off the table.
  • No temporary buydowns and no recasting.
  • No exceptions. There is no committee to appeal to. The file either meets the screen or it does not.

Loan amounts run from {{product.loanMin}} to a hard ceiling of {{product.loanHardCap}}, or the applicable conforming limit where that is lower.

Loans outstanding, per borrower {{product.maxLoansOutstanding}} The maximum any one borrower can carry under this program at a time. A repeat investor can use it, but only so far - after that the portfolio moves to other financing.

The two minute screen

Who fits, and who does not

It fits when

  • The buyer is purchasing a non-owner-occupied {{product.unitsRange}} unit property.
  • The down payment lands between {{product.downMinOneUnit}} on one unit ({{product.downMinMultiUnit}} on two to four units) and {{product.downMaxEligible}}.
  • Credit is {{product.ficoMin}} or better, and DTI lands at or under {{product.dtiMaxOneUnit}} on a single unit, {{product.dtiMaxMultiUnit}} on two to four.
  • The buyer already owns a primary residence and has documented reserves sitting behind the down payment.
  • Down payment and reserves are the buyer's own funds.

It does not fit when

  • The buyer is putting {{product.downIneligibleAt}} or more down. Minimum LTV is {{product.ltvMin}}, so the larger down payment disqualifies the loan and standard agency financing applies instead.
  • The buyer is refinancing. Purchases only.
  • The buyer does not already own a primary residence and needs the subject's rental income to qualify.
  • The down payment is a gift.
  • The plan is short-term rental.
  • The property is a manufactured home, mobile home, co-op, or working farm.
  • The buyer already has {{product.maxLoansOutstanding}} loans outstanding under this program.
  • The buyer is a foreign national.
Clears the left column? The call is worth making. Lands in the right column? You just saved everyone a week.

The screen, in one line

{{product.downMinOneUnit}} ({{product.downMinMultiUnit}} on two to four units) to {{product.downMaxEligible}} down, {{product.ficoMin}} or better,
already owns a home if the rent is needed to qualify,
own funds, reserves behind the down payment

If a client clears that line, send them over. If they do not, you have your answer without making a call. Questions, a read on a live deal, or a session for your office - reach out.

This information is intended for licensed real estate and industry professionals and is not intended for use by consumers or third parties. Equal Housing Opportunity. All loans subject to underwriting approval; certain restrictions apply. CrossCountry Mortgage, LLC NMLS3029 (www.nmlsconsumeraccess.org). Based on the {{product.name}} program guidelines, available for locks beginning {{product.lockAvailableFrom}}. Program terms are subject to change.

Equal Housing Opportunity {{compliance.pendingLabel}} {{event.ctaUrl}}