Use Equity for income?

Every once in a while, a loan program comes along that makes you say, "Well, that could actually solve a real problem." This is one of those programs. 

We now have a new loan option that may allow a borrower to use real estate equity as additional qualifying income. That means that if a client does not show sufficient monthly income on paper but has strong equity in the property, we may be able to use a portion of that equity to help them qualify.
This can be a huge deal for retirees, self-employed borrowers, buyers with limited fixed income, or clients who are financially strong but do not fit neatly inside the traditional lending box.
Here is how it works in simple terms.
The borrower must have at least 20% equity and meet the ownership requirement. The program can use 60% of the qualifying equity and divide that amount over 60 months to create additional monthly qualifying income.
So, let’s say Grandma wants to buy a home for $1.2 million.
She receives $3,500 per month in Social Security income, but based on the new payment, she really needs closer to $9,000 per month in qualifying income.
She does not want to put her kids on title. She does not want them to co-sign. She may be receiving help from them each month, but on paper, her own income is not enough for a traditional loan. 

Looking at the equity.
If Grandma is putting $800,000 down on the new home, we may be able to use 60% of that equity to qualify.
60% of $800,000 is $480,000.  Then we divide that $480,000 by 60 months. That gives Grandma an additional $8,000 in qualifying income per month.
Now her qualifying income may look more like this:
Social Security income: $3,500 per month /Equity-based qualifying income: $8,000 per month / Total qualifying income: $11,500 per month
That could be the difference between "sorry, you don't qualify" and "yes, we may have a solution."
This is not a loan for every borrower, and it does not replace common sense. The client still needs to be able to afford the payment, and we always want to make sure the loan makes sense long term. Not every good borrower fits into a conventional or government loan box. 

This loan will help get a lot of people over the finish line! If you have a client with strong equity, a large down payment, or a unique income situation, let's take a look before they give up. There may be a way to make the numbers work. 

Interest Rates
The day started slow and is finishing strong! Bad economic news offset the bad Iran news in the early hours, and now more good news is coming about the end of the war, which is helping rates quite a bit!   

Loan Programs Snapshot

• Government loans (FHA/VA/USDA): in the 5s and now low 6’s
• Conventional (≤ $832,750): low to mid 6s
• High-balance: mid to high 6s
• Jumbo: Mid to high 6s
• Bridge Loans 7.75-7.99

Additional options:

• Bank statement loans (10% down+)
• P&L loans (20% down, no bank statements)
• 0% down options (620+ score)
• DSCR loans (15% down)
• Bridge loans (~7.99%)
• Buydowns (3/2/1, 2/1, 1/0)
• Private Money loans – Hard Money  
• Construction Loans
• 203K loans
• Fix and Flip Loans  

Rates subject to change without notice. 

Condo Update

• Good news: None today
• Bad news: The Madisons / Madisons at Town Center look really bad at this point!  

We love your Non-Warrantable Condo loans!!

Need help checking a condo? Call me, and we can look it up in real time.
Also:
Full California "naughty list" available here:
https://mikemeena.com/non-warrantable-condos/

Let's Connect
If you or your clients, friends, or family need guidance, I'm here.

📞 661-291-2222 (Direct)

📞 661-714-6258 (Cell)

📞 661-260-2970 ext. 2222 (Office)

📧 Mike@AugustaFinancial.com

Sincerely,