TheMReport — News and strategies for the evolving mortgage marketplace.
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30 | M R EP O RT FEATURE A Powerful Tool for Brokers and Investor Clients A n Investor Cash Flow loan allows cash flow on the property to be used to qualify for the loan. Tax returns and employment information is not required. This means that borrowers can use the projected rent payments even if the home is not rented. Guidelines are not as strict with these loans, making it possible to seize an opportunity regardless of your borrower's income status. Talk to your lender about other benefits to the Investor Cash Flow product. The right loan option and a trusted lender is crucial in growing a property investment portfolio. There are many lenders that offer investment property loans, and their guidelines vary. Choose a lender with a unique and innovative Investor Cash Flow mortgage loan product that provides the most favorable position to get qualified and approved. Make sure that diverse property types are eligible, including 1-4 unit properties, warrantable and non-warrantable condos, among others. It is also important to know that some lenders require that borrowers maintain a minimum debt service coverage ratio (DSCR). DSCR guidelines vary by lender since there are no regulated guidelines and many lenders have different tiers of DSCR. There are lenders who have lower DSCR requirements, which make applying for a loan less frustrating. For anyone concerned of the risk associated with not taking into account DSCR, take solace in knowing that times are different, and the majority of real estate investors today are able to almost immediately use rental income to repay their mortgages. A lender you trust can explain the benefits of an Investor Cash Flow loan and help you market this product to your borrowers. Let your real estate investor clients know that they can build their portfolios without the typical challenges in the loan process. The Right Lender Makes It Happen A n investor with a great deal on a property has already accomplished a huge step in the process. Competition can be fierce, and the loan process needs to be quick and easy. A go-to lender known to be an expert in the space with an innovative loan product makes for a satisfied investor client. These clients will stick with bro- kers who get them to the closing table quickly. A long-term investor client can be a dream come true for a broker. Who doesn't want a client with continuous repeat business? The goal of property investing is to amass as many properties as financially feasible. That's a lot of loans to close. The challenge of working with an investor—which is a great one to have, by the way—is to be ready at the spur of the moment to get it done. The quicker the deal closes, the better, because the client knows they can count on you to secure a deal. Once a client knows their lender's requirements for financing and that they have a solid product that works, a long-term relationship is easily established. Earning commission from the same lead every few months (in some cases), or even a few times a year, is a great win in the mortgage industry. The key is to have a lending partner and product ready to roll. The mortgage industry has experienced a transition very beneficial to anyone involved. The success of non-QM, still the largest growing segment in the space, has made a huge difference to borrowers and broker's busi- ness growth. With rental demand increasing, the focus on prospect- ing for real estate investors is a smart strategy for any broker. It looks like 2020 will turn out to be the year to buy a house to rent. That means 2020 could be the year you are the go-to broker for property investors. The more homes they buy equals the more loans you close. So, if a property investor should ask you if 2020 is a great time to buy real estate, you can say, "Yes, it is! Let's get started." Here's to a prosperous New Year! . TOM HUTCHENS is EVP of Production at Angel Oak Mortgage Solutions, an Atlanta-based wholesale and correspondent lender leading the non-QM space for over five years and licensed in 44 states. Hutchens has been in the real estate lending business for nearly 20 years. He may be reached by phone at (855) 539-4910 or e-mail Info@AngelOakMS.com. The lack of affordability is isolated to certain markets. In fact, the greatest challenges are mainly in high-cost markets where it is harder to find a deal. Otherwise, great deals are plentiful coast-to-coast, making real estate a great investment strategy in 2020. It is projected that rental growth for lower- priced homes could outperform the rest of the market.