Tuesday, February 23, 2010

Why doesn't this buyer get a mortgage?

In today's lending environment, there may be many reasons why an investor could not or chooses not to qualify for a mortgage without a credit partner (or co-borrower). It may be because they are not a W2 wage earner, cannot document earnings (which may be invested in their company as opposed to being paid out as wages), or simply because of the difficulty in today's lending environment of receiving a stated income loan. There are new limits on the number of mortgage loans that an investor may have in their name, or requirements for debt to income coverage on their investment properties that limit their access to conventional financing.

However, with access to today's historically low mortgage interest rates, a savvy investor can generate enough rents and income to create cash flow on properties that may be expected to appreciate in value as the real estate market recovers. A solid investor partner should have no trouble covering costs of obtaining a mortgage for their credit partner, as it is much less expensive than obtaining hard money or other short-term financing.

In the next blog, we'll talk about the risks that a credit partner faces in working with an investor.

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