What Is an Investor Cash Flow Loan?

Written by Banks Editorial Team
3 min. read
Written by Banks Editorial Team
3 min. read

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If you’re a real estate investor, you know firsthand how challenging it can be to get the funding you need to expand your portfolio. Luckily, there are innovative mortgage programs, like Investor Cash Flow Loans, that make it easier to get to the closing table without all the hassle. 

Traditional and NQ Mortgage Loans

 
Are you looking to finance a home too expensive for a conventional loan? An Angel Oak Jumbo Loan can provide financing for up to $3.5 million.

What Types of Loans Do Investors Use?

Beyond Investor Cash Flow Loans, real estate investors also use Asset Qualifier Home Loans. Instead of proving your income through tax returns or providing employment information, you can use your assets to qualify for a mortgage. Plus, most lenders don’t have debt-to-income requirements for Asset Qualifier Home Loans.

Allowable assets include checking accounts, savings accounts, retirement accounts, investment accounts and stocks. You’ll need a minimum of $500,000 assets (post-closing) to be considered for this home loan product, and it can be used to purchase a property or refinance a property you already own.

How Do Investor Cash Flow Loans Work?

Investor Cash Flow Loans are non-qualified mortgage products that cater to real estate investors. Furthermore, the lender determines how much loan you can afford by analyzing the projected cash flow on the property you’re looking to purchase. No need to provide proof of your personal income through tax returns, income statements or other employment information. 

How to Qualify for an Investor Cash Flow Loan

Below are the general eligibility requirements for these loan products. Keep in mind that some lenders have other guidelines you must meet to qualify for financing. 

Credit Score

You’ll typically need a credit score of at least 680 to be eligible for an Investor Cash Flow Loan. 

LTV Ratio

The loan-to-value ratio (LTV), or the home loan amount compared to the property’s appraised value, on these mortgage products is capped at 80 percent. So, if you purchase a home that’s worth $400,000 and take out a loan for $300,000, the loan-to-value is 75 percent. 

Property Cash Flow

The minimum allowable debt service coverage ratio (DSCR) is 1.0, with a credit score between 680 and 699. But if your credit score is 700 or higher, there’s no minimum DSCR requirement, but the maximum LTV is 75 percent.

DSCR, which measures a property’s projected cash flow, is determined using this formula: 

  • Annual Gross Rental Income / Annual Debt Obligations (including principal, interest, homeowners’ insurance, taxes and homeowners’ association fees, if applicable) 

So, if the property you’re considering earns an annual gross rental income of $45,000 but comes with annual debt obligations of $20,000, your DSCR will be 2.25. This means the property is likely to earn 225 percent more income than what’s owed in annual debt obligations. And in this case, you would be eligible for an Investor Cash Flow Loan (assuming you met the other qualification criteria).

Property Type

Investor Cash Flow Loans can be used to purchase or refinance several property types, including short-term rentals and vacation rentals by owner (VRBOs). However, hotel and condo purchases aren’t permitted. 

Down Payment

You should also prepare to make a down payment of at least 20 percent to get an Investor Cash Flow Loan. 

Traditional and NQ Mortgage Loans

 
Are you looking to finance a home too expensive for a conventional loan? An Angel Oak Jumbo Loan can provide financing for up to $3.5 million.

Advantages and Disadvantages of An Investor Cash Flow Loan?

Before deciding if an Investor Cash Flow Loan is ideal, consider the benefits and drawbacks. 

Benefits of Investor Cash Flow Loans

  • You can purchase a new property or refinance a property (cash-out or rate-term) you already own. 
  • You may be eligible for a loan, even if you own other properties. 
  • You won’t have to submit personal income documentation. 
  • Your personal debt-to-income (DTI) ratio is not required to be verified when you apply. 
  • You can use the loan proceeds to purchase several types of property. 
  • You can purchase the property in your Limited Liability Company’s name (if applicable). 
  • You may close faster by choosing this loan product compared to traditional mortgages. 

Drawbacks of Investor Cash Flow Loans

  • You’ll need to pay for a second appraisal if you’re seeking a loan at or above $1,500,000.
  • You may not be eligible for an Investor Cash Flow Loan if you have limited experience as a real estate investor. 
  • You’ll need a sizable amount of reserves to qualify for a loan.

See If You Qualify for An Investor Cash Flow Loan

When you’re ready to explore funding options, consider Angel Oak Home Loans. It’s a reputable full-service mortgage lender offering innovative financing solutions to borrowers who may not qualify for traditional home loan products

You could be eligible for an Investor Cash Flow Loan between $75,000 and $1.5 million with a minimum debt service coverage ratio of 1.0. If your credit score is at least 700 and your loan-to-value doesn’t exceed 75 percent, there’s no debt service coverage ratio requirement. 

The loan can be used to purchase a home or complete a rate-term or cash-out refinance. Even better, you won’t have to provide employment or personal income information when you apply, and there’s no limit on the number of investment properties you can acquire. 

Below are some additional eligibility criteria: 

  • You’ll need a minimum credit score of 680. 
  • You must own a primary residence. 
  • You’ll need to pay for a second appraisal if the loan amount is at or above $1,500,000.

To learn more about this loan product or start your application, complete this brief online questionnaire. A loan officer will reach out to discuss your unique funding needs and explore other options that could also be a good fit. 

Angel Oak

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