Qualifying for a Mortgage on an Investment Property with No Income

People like to make money on all kinds of investments, from market indices to real estate. Properties are often a great place to put your money because, according to common wisdom, they typically increase in value over time.

This makes sense: homes always need improvements such as roofs, siding, and HVAC systems. These are all aspects that some eventual buyer will be willing to pay for at a later date if and when you’re ready to sell.

So, whether you’re buying an investment property to flip or to turn into a rental, know that you’re probably making a wise move.

Where things may get a little confusing for the novice property investor is in getting a mortgage for the purchase.

Now, there are many kinds of mortgages available to consumers. Lenders usually ask for more or less the same financial information from all applicants, but there are certain differences between mortgages for investment properties and mortgages for primary residences.

Mostly, these differences lie in the interest rates and terms. But with investment properties, there is another catch that we have to consider: what if you’re buying property but don’t have any significant income?

At Castle Rock Mortgage LLC, we have loan programs in Arizona that will satisfy just about any prospective mortgage borrower. Qualifying for a mortgage on an investment property is certainly possible without traditional income, but it takes a special program to do it.

Let’s learn how. You can contact us right now to learn more about your mortgage options with us.

Why Private Investment Property Loans Are Less Favorable

First, let’s discuss one option that some property investors might consider: private or personal loans.

The situation would be this. You’re looking to buy a property and flip it or keep it on as a rental for yourself. You can’t pay for the property outright, and so you need a mortgage to do so. However, you don’t earn traditional income that is documented on employer-issued W2 forms and are considering turning to other options, such as personal or private loans.

The primary issue with personal loans for investment properties is that their terms are not all that favorable to borrowers. They tend to be short-term--lasting maybe about a year--and have much higher interest rates than a conventional mortgage would.

You want the property, but it would be hard not to see a personal loan as more of an obstacle than a tool.

Mortgage Options for Property Investors

Fortunately, you still have plenty of options available to you!

You can still qualify for a mortgage on an investment property with no income, but you have to look at a certain group of options meant for individuals like you. If you are self-employed, own a business, work on commission, or are retired but with significant assets, Castle Rock Mortgage LLC can help you!

Here are some choices you have.

Conventional Financing

Just because you have non-traditional income doesn’t mean you are barred from securing a conventional mortgage for your investment property. Conventional mortgage loans have favorable terms for borrowers, as in, longer terms with lower interest rates.

The only possible hangup that people with non-traditional income may have with conventional mortgages is that these loans are issues based on sufficient and consistent income. Your commissions or business-generated income would have to show a lender that you could afford a certain percentage of the down payment. You would also have to prove that your debt-to-income ratio is under control.

But don’t discount the conventional mortgage route just because you don’t have W2s to prove income.

Investor DSCR

If you actually have no income whatsoever, you still have options, primarily asset-based financing. This uses the value of the property you are trying to buy as the basis for the mortgage. In other words, the rental income you make from your new rental property will be used to fund the mortgage.

Our Investor (DSCR) Program is designed for investment, non -owner-occupied loans that are designated for business purposes only. This program does not require disclosure of employment or income and is not to be confused with investment property loans qualified under any other Program.  

Now, the mortgage lender will still need you, the borrower, to submit to the other traditional methods of background checking. The lender will want to see your personal credit history and may have you supply a down payment of up to 25%.

We establish your Ability to Repay (ATR) by just reviewing your credit and how the subject property cash flows.  Debt-Service Coverage Ratio = (Gross Income / Proposed PITIA).  We use the lower of the (a) executed lease agreement or (b) market rent from appraisal form 1007, then just divide by the proposed PITIA.  If the executed lease agreement reflects a higher monthly rent, it may be used in the calculation when evidence of receipt of the higher amount for the 3 most recent, consecutive months is provided.  No limitation on number of properties financed.

You will also pay a higher interest rate with an asset-based mortgage than with a conventional mortgage, and there may be penalties for prepayments. But when you have inconsistent income or none at all, you can still make use of the assets you do have to turn your dream of owning investment properties into reality.

Qualify for Your Mortgage with Castle Rock Mortgage

Buying investment properties is one smart way to make some additional income. Anyone with enough funding can do it, but lenders understand that investors are all unique. While some investors finance their purchases with their income, others need to turn to special types of loan programs to make it happen.

At Castle Rock Mortgage, it’s our job to set you up with the best type of mortgage loan for you. We’ve been securing home loans in Arizona for our clients for years, and we would love the opportunity to help you, too.

Get in touch with us today to tell us what you need!