LendSure specializes in mortgages that meet the unique needs of your clients.
Because we take an outside-the-box approach to lending, it’s natural that mortgage brokers can face something of a learning curve with our loan programs. After all, our loan programs are very different from those offered by agency lenders. With that in mind, here’s a quick overview of how income is calculated in LendSure’s various non-QM mortgage programs. Our goal is to be transparent: if mortgage brokers understand our non-QM offerings, they’re better able to successfully navigate our programs and guide borrowers to the most appropriate product.
Writing better loans starts with understanding the income documentation options available to borrowers. Here’s a rundown of four ways to calculate income for non-QM lending programs:
Category 1: Full-Doc Income Calculation
Full documentation offers the lowest rates. Income calculation is based on the borrower’s W-2 or 1099 earnings. If your client falls into the W-2 category, we’ll need the past year or two of W-2s, plus recent pay stubs.
If your full-doc borrower is self-employed, we’ll need two years of tax returns. That includes two years of IRS Form 1040s plus two years of business tax returns or 1099 forms.
If the full-doc loan is for a rental property, keep in mind that Fannie Mae adds negative rental cash flows to the monthly debt calculation, resulting in a higher DTI. However, LendSure uses negative cash flow to offset the total income, resulting in lower DTIs and better rates.
Category 2: Bank Statement Income Calculation
This income calculation method, designed for self-employed borrowers, carries a higher rate than full documentation. When starting the process with one of these loans, LendSure will conduct a pre-qual evaluation of income based on 12 to 24 months of bank statements. You don’t have to submit a full file.
LendSure offers a number of flexible features. We don’t require a CPA letter or P&L statements, and the borrower need not be 100% owner of the business. And we’ll accept statements from multiple business bank accounts.
Also, we look at expense ratios on a case-by-case basis. The expense ratio is the percentage of operating costs that are deducted from business income, and we adjust the ratio depending on the borrower’s scenario.
As for LTVs, we go as high as 90% for borrowers with 740 FICO scores, and as high as 80% LTV for borrowers with 640 FICO scores.
To clear up any mysteries or misconceptions around the underwriting process, here’s what LendSure’s underwriters look for in bank statement loans:
- Are deposits consistent from month to month?
- What do the withdrawals of the bank account look like? Is the borrower paying for personal items from the business account, or are the withdrawals business related?
- How much overhead does the business have?
- How is business trending? Is income increasing or decreasing?
- How long has the borrower been in business?
- Does the account have overdrafts and NSFs?
- Does the name on the bank statement match the URLA?
Category 3: DSCR/Investor Cash Flow Income Calculation
This category of non-QM mortgages focuses on investor properties. Because the underwriting terms are the most flexible, the rates are higher than the previous two types of income documentation.
The DSCR (debt service coverage ratio) equals gross rents divided by PITIA. If DSCR is greater than 1, that means there is sufficient cash flow to cover the debt service. If DSCR is less than 1, that means there is not enough cash flow to cover the debt service.
However, a DSCR of less than 1 isn’t a deal breaker. The DSCR determines qualification and pricing, but we can and do approve borrowers with ratios below 1.
LendSure requires no other income documents for DSCR loans. We consider the ratio as your income; borrowers only need to complete a schedule of real estate owned.
We don’t need mortgage ratings on other properties, and there’s no need to verify taxes and insurance on other properties. We’ll even close multiple loans for the same investor at the same time.
LendSure’s DSCR loans are available in amounts of up to $1.5 million, with a minimum FICO score of 620.
Category 4: Asset Depletion/Asset Qualifier Calculation
Do you have clients that have assets but can’t qualify for a mortgage using the other income calculation methods? LendSure’s Asset Depletion/Asset Qualifier programs let borrowers use their assets – including cash, brokerage accounts and retirement assets — to qualify for a mortgage.
With the Asset Depletion/Asset Qualifier programs, income can be based on the qualifying assets drawn over a 120-month or a 60-month period, from which a loan amount can be derived using DTIs as high as 50%. Both programs require minimum gross assets of $500,000, and the 60-month Asset Qualified Program requires the greater of $500,000 or the loan amount plus 60 months of all of the borrower’s debt service.
Borrowers with great credit and significant assets, but no steady monthly income, may be able to use their assets to qualify for a mortgage
The LendSure Way
It’s simple. We make loans that make sense. We’re not in-the-box lenders. Of course, there are numbers and ratios and data to consider, but we know that behind every file, there’s an individual with unique circumstances seeking a loan. We work hard to offer our commonsense take on lending to borrowers seeking funding for the home of their dreams, another addition to their investment property portfolio, or refinancing of a currently owned property.
Are you ready to grow your business? Conforming loan approval guidelines can be restrictive, but we want to offer our mortgage broker partners the education, tools, support and guidance they need in order to say “yes” to more of their clients. This ensures happy borrowers and opportunities for bottom line growth. What are you waiting for? Let’s get started!
Are you ready to benefit from a commonsense approach to lending? Contact us today to learn more about non-QM mortgage loans and how partnering with LendSure Mortgage Corp. can help grow your bottom line.