All Forum Posts by: Bryan Maddex

Hey @Kamal Martin

There are plenty of DSCR lenders who will lend to you if you do not own a primary home. There are also some lenders that will allow you to have NO investor experience. Most lenders will one one or the other, some will want both. But there are lenders for new investors who do not own a primary home.

Let me know if you are still looking for a lender, I work with 220+ lenders and have several that will work fine in your situation!

Hey John!

CORRECTION from above statement(s): Many Lenders will NOT require you to be a Personal Guarantor of a loan your partner gets.

There are DSCR lenders will allow only a single 20 or 25% owner of an LLC to sign a Personal Guarantee (other owners are not on the loan, or liable for the loan). Other members of the LLC are not required to sign as PG.

This does not show up on credit, and if the LLC is the borrower and property is owned by the LLC, you do not have to disclose this property on a new mortgage application. If you do have to show tax returns, it will show your LLC owns a property and you can show underwriting a copy of the note to show that you are not liable for this mortgage/note.

If your partner does a conventional loan, you would sign allowing the mortgage to be recorded, but you do not need to sign as personal guarantee on the NOTE for a conventional loan either!

As long as you are not a borrower, there is no note or loan that will negatively affect your dti from a debt perspective. If the LLC you own shows a loss (beyond depreciation), and you are an owner of that LLC, this would carry into your personal tax returns on Schedule E, page 2 from your K1. You could look into forming a C Corp as an alternative way to own this property that could affect your tax returns differently, I am not a CPA or giving tax advise.

I got confused with a lot of the answers on this thread so thought I would confirm for you that the debt your partner gets will not be on your credit report and the debt will not negatively affect your DTI on new mortgage applications. You are not a borrower, you are not liable for the debt, you may need to sign the security instrument to allow the mortgage to be recorded, but this does not change the above statements.

Take this example and remove the LLC as a part of this conversation for simplicity. I own a home with my wife. I do a heloc on the house and I am the only borrower on the heloc. This heloc does not, in any way shape or form, affect my wife's DTI. Yes, it is debt tied to a property she owns. No, it does not affect her DTI. She did not sign the NOTE. She is not a borrower. She only signs to allow the mortgage/deed of trust/security instrument to be recorded.

THIS WILL NOT need to be disclosed on any future applications (URLA or Uniform Residential Loan Application) as this is NOT your debt!

If you want to talk thru this, or work with a lender that does not require you to be a part of the loan, let me know!

Hopefully this helps clear up the main point of your post!

2nd vote for Jeff Watson. Wealth of knowledge and studies case law!

 Sure thing!

Last thought (mainly for future readers), you may be talking about the 1 year FHA history if you have variable income. Variable income is SUPER hard since covid and no real way around that beyond showing an offer letter that states you get a minimum guaranteed hours, and you may need a payroll log to prove you never went below that number.

Hello @Todd David Crouch!

First, banks do not prefer W2 income over 1099 income at all. They just use those incomes differently. 

For 1099 income, we will look at a 2 average of income using your NET NET income (bottom line income).  Most lenders will add back in depreciation and around 1/2 of your milage expenses. Any other expenses are using up funds that would otherwise be sitting in your checking account to make a mortgage payment with. If you tell the IRS it is an expense, it is no longer income.

W2 income does not use a 2 year average for your base pay!  If you have a 2 year work history, and go get a W2 job tomorrow, we could use your base pay right away (as long as it is "guaranteed hours" or considered "full time".  Bonus, Overtime, and Commission income all typically need a 2 year average either at the same job or in the same line of work. (Usually you cannot use prior employer history until you have been at your new job for 6 to 12 months, depending on the underwriter to show that you are maintaining the same level of bonus/overtime/commission income that you had at your prior employer). You can get a 1 year look back occasionally so you do not always need a 2 year average. 

The "non conforming" lending options are actually called NonQM (non qualified mortgages). This term replaced "subprime" and looks a lot different than subprime loans of the past. You usually can do these loans with NO points, you just need to work with a broker who has access to dozens of lenders as there are plenty of lenders that can provide these type of loans with No Points.  You may need to pay points if you put less than 20% down, but lots of no point options once you get to 20% down as long as you have decent credit scores. 

Once you file your 2nd year of tax returns, you may now be able to qualify for Agency Loans (FHA/Conventional). The higher rates and no point options hopefully are temporary for you until you are able to show a 2 year history of 1099 income, refinance early in 2026 once you have completed your 2025 returns.

There are also "no income loans"!  These need 20%-25% down, require a 680-700+ credit score, and 6 to 9 months of reserves (reserves are payments in the bank).  Rates are usually in the high 8s or low 9s, and you are likely going to pay 3-4 points for these loans. 

Let me know if you have any questions!

Hello @Anthony Sigala! I have some news for you, FHA does NOT require a 1 year work history!

Sadly, FHA has a 2 year work history requirement, as does Conventional and USDA financing.  FHA and Conventional loans will allow schooling to count as work history. USDA does not.

If you have a job gap (6+ months of unemployment) on an FHA loan, then you have to go back 2 years prior to the job gap AND be back to work for 6 months before you are eligible.

How to avoid this?  Do a conventional loan! If you are looking at FHA because of credit score, then I would work on credit scores to qualify for conventional financing or see if you can get a very strong coborrower with high scores.  

If credit scores are fine, and you are just new to the work sector, then I would suggest doing a conventional loan with a strong income "non-occupying coborrower".  You do not actually need any income if they have high enough income to afford their bills plus your new house. As long as you are on the loan, on title, and live in the home for 12 months minimum, then your non occupying coborrower can qualify for 5% down at owner occupied rates. Once your income is stabilized, you can do a refinance to remove your coborrower back off of the conventional loan. 

Let me know if you have any other questions!

Let me know if you have any other questions

Hello Monty!

First, lets set some inaccurate information straight.  There are a couple of companies out there that will let you do a cash out refinance with no income! Rates are high, usually in the high 8s or low 9s, and you may pay 2-4 points on the loan.  But, you can go up to 65% loan to value with no reserves, or up to 80% loan to value if you have 12 months payments already in the bank (12 months reserves_. The harder part for you may be credit scores. These programs usually need a 700+ score. Last, like i tell many clients, "just because I have a program doesn't mean you will want it". 

Helocs have many different ways to calculate income once you get outside of the bank world.  Bank Statements and Asset Depletion can be used with helocs! There are plenty of banks across the US that also have a stated income heloc (in the Carolinas, First Citizens will do up to $100k with no income verification).  You do not want to lie on an application, that is mortgage fraud. But what you make and what the IRS thinks you make can be two very different numbers.  Credit is also going to hinder your ability to get a heloc, and lack of income for now. 

Reverse Mortgages (HECM or Home Equity Conversion Mortgage) can be a FANTASTIC tool!  The loan to value that you can go up to will mainly be determined by your age. Credit is a factor as bad credit may limit options, or may have the lender require you to put 10 or 20 years of taxes and insurance into escrow. 

Last, there are several companies out there that will give you a "mortgage" and not have you make payments!  These programs are called Equity Share programs. You are essentially doing a partial sale of your home. They do not collect payments, but when you sell your home they will get some of your equity appreciation. I have access to several of these programs but have not dived into them deeply. They do require these to be done on Primary Residence, and they probably do have a credit component, but may not have an income component to underwriting. If you are interested in these options, reach out to me and my team can go deep with a couple of our lenders that offer these programs. 

Now, lets talk about credit.  Credit Karma has a fantastic "score simulator" tool that you can use to project credit score changes (paying off balances, opening a new card, using an old card that has not been used in some time, just paying your bills on time for 6 or 12 months). I highly recommend you play with that tool to start getting an understanding of what things you can do to positively affect your credit!  Credit Karma uses a Vantage scoring model (which we do not use in the mortgage industry), but the trend will be the same as mortgage scores.  If you can get your Vantage Score up 50 points, you will see positive results on the mortgage scores as well, it just may be 30 or 40 points or could be 60 to 80 point increase vs Vantage increase of 50 points. 

Another great tool to use is myfico.com. You can pay $29.95/month on their Advanced subscription and see where your actual Mortgage FICO scores are at!  Cancel after you pull, unless you like the tools it offers. 

If you go back into the workforce, you may need to be back to work for 6 to 12 months before your W2 income can be used.  If you go back to work as self employed, there are some NonQM programs out there that can do a cash out refi after just 1 year of bank statements or P&L. 

I would focus on credit, consider some alternative options to "free your Benjamins" out of your home, or even consider doing a partial sale of your home to give you capital to get back at it!

Here for you if you have any questions and good luck relaunching yourself!

When you go to a Bank or Credit Union, they can only offer you what products that bank or credit union offer. You can shop 10 or 20 lenders in a weeks time, find out what products they offer, what rates, what overlays and qualifications they each have for you.... or you can reach out to a broker who can shop 80 lenders in a matter of minutes for you. Some lenders work with 220+ lenders and can really understand which lenders are best for you based on your situation.

There was an article published in Sept 2024 that showed the average consumer would save over $10,000 by working with a broker vs a direct lender over the life of their loan. https://nationalmortgageprofessional.com/news/study-reveals-....

Not sure BP will allow that link to post, if not just google " 10000 saved using a broker vs direct lender" and you can find the article.

On the flip side, there are some banks and credit unions that could offer products that they do not allow to be brokered. Generally, #brokersarebest but there are outliers to that statement.

Happy to talk thru options for what you are looking for!

When you go to a Bank or Credit Union, they can only offer you what products that bank or credit union offer.  You can shop 10 or 20 lenders in a weeks time, find out what products they offer, what rates, what overlays and qualifications they each have for you....  or you can reach out to a broker who can shop 80 lenders in a matter of minutes for you. Some lenders work with 220+ lenders and can really understand which lenders are best for you based on your situation. 

There was an article published in Sept 2024 that showed the average consumer would save over $10,000 by working with a broker vs a direct lender over the life of their loan.  https://nationalmortgageprofessional.com/news/study-reveals-....

Not sure BP will allow that link to post, if not just google " 10000 saved using a broker vs direct lender" and you can find the article.

On the flip side, there are some banks and credit unions that could offer products that they do not allow to be brokered. Generally, #brokersarebest but there are outliers to that statement. 

You can get a "renovation heloc" which will give you a heloc based on the ARV of your property. You can get 90% of the future equity, but you do have to have a GC do all of the work for you so you cannot DIY for future repairs.

Not all homes are great long term rentals!  You already mentioned Mid term, which can be a great way to increase cash flow. You could also consider CoLiving/Rent By The Room(RBTR)/Single Room Occupancy(SRO)/Padsplit. This is a growing trend in rentals to increase cash flow and help your community with affordable housing!  Watch out for ordnances and HOAs with this strategy. 

Or, plan on this being a nest egg builder and growing your equity, living in the home for 2 of the last 5 years and then selling with Section 121 exclusion.  Even if you rent at a break even or slight loss, if you could have 3 years of rental income offsetting your mortgage while realizing 3-6% appreciation, could be worth it, especially if you think appreciating for this area will exceed national averages. Or do MTR or SRO for up to 3 years then sell!