On behalf of our client, we obtained a jumbo cash-out refinance on his rental investment property, a 4-unit in Miami Beach, Florida. The loan amount was about $615,000 at 70% loan-to-value (LTV). He used the loan proceeds to pay off the mortgage on this 4-plex property as well as the mortgages on some of his other investment properties in Miami-Dade. He was previously paying an interest rate of at least 10% on his old mortgages to a private money lender.
We refinanced him into a 7/1 adjustable-rate mortgage (ARM) with a 30-year amortization with an institutional lender. His interest rate will be fixed for the first seven years at 6.375% and then adjust annually thereafter.
The loan program we qualified him under is known as the “No Ratio” program, which is ideal for borrowers who cannot qualify under a traditional bank’s strict underwriting guidelines. Highlights of the “No Ratio” program include:
- The lender does not impose a debt-to-income ratio (DTI) requirement, hence the term, “No Ratio” program.
- Therefore, the lender does not require the borrower to provide any tax returns, W2s, paystubs or other income documents.
- In other words, the borrower does not need to prove that their DTI is under a certain percentage.
- Instead, the lender qualifies the borrower based on the property’s income potential compared to the property’s expenses. (This ratio is known as the debt service coverage ratio (DSCR)).
- The minimum credit score required is 620.
- No reserves are required.
The “No Ratio” program was particularly beneficial to our client, as he did not want to show his income through his tax returns.
Our client intends to use the cash-out proceeds to invest in more Florida residential real estate to add to his portfolio of investment properties.