Most of us have never seen economic times like this for real estate. Prices have plummeted in many markets, creating great buying opportunities. But at the same time, the credit is gone or at least dramatically changed. Where can you get money in today’s real estate market?
Loans for Residential Property in Today’s Credit World
You can count on a requirement of at least 10% down for the purchase of your principal residence. If you’re buying investment property, you’ll probably need to come up with 15 – 20% down.
Credit scores (FICO scores) are more important than ever before. Figure on needing at least a 750 score to get the good loans.
The “stated income” loans are days gone by are gone now. Everything requires a “full doc” loan, meaning you’ll have to provide copies of your tax returns plus financial statements. It doesn’t mean that a self-employed person can’t get a loan, however. You just need to make sure the mortgage broker you’re working with has a lot of experience.
Getting a Loan if You’re Self-employed
There are three steps for getting a loan if you’re self-employed:
- Get the right mortgage broker. Ideally find someone who has been in business since at least 1998. That was the last time that we went through a credit market even somewhat like this.
- Calculate all the “add backs” to determine true net income from your business. Some common examples of add backs include depreciation, health insurance, travel and auto expense.
- Have your mortgage broker prepare a LOX (letter of explanation) to accompany your application. This letter explains your add backs.
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