“Traditional” banks will require income documents before approving a real estate mortgage. You will need to qualify based on your declared income using tax returns, less your monthly debt servicing. That is fine for a “traditional” investor; however, at America Mortgages, we deal with various real estate investors, and 100% of them live and work outside of the U.S – “traditional” is definitely not our type of clients.
Last week’s launchpad article talked about using your asset portfolio income to qualify for a U.S. mortgage. This week, we introduce our newest mortgage program, The America Mortgages’ Investor Rental Mortgage (AMIRM)!
What is AMIRM?
The America Mortgages’ Investor Rental Mortgage (AMIRM) is a debt service coverage mortgage (DSCR) that uses the borrower’s capacity to service or repay the yearly debt payment to the amount of net operating income (NOI) generated by the property. Lenders use the debt servicing coverage in the underwriting process. By using AMIRM, an investor may qualify for a property purchase or refinance using strictly the rental income. AMIRM does not require the borrower to provide any personal income documents, making the process quick, simple and very straightforward. If the monthly rental income (projected or current) covers the monthly mortgage payment and the incidentals such as tax, insurance, and monthly maintenance fee then the loan “debt services” and should be approved. It’s that simple!
Important takeaways of AMIRM:
- The debt payment coverage ratio (DSCR) shows how much net cash flow is available to pay the mortgage, typically it is a 1:1 coverage.
- When examining rental property performance, both real estate investors and lenders utilize the DSCR.
- Possible to qualify on interest-servicing only.
- The DSCR might fluctuate yearly, but the approval will be based on the current/project rental income.
The AMIRM determines whether or not a property generates enough revenue to cover the mortgage payments. When a real estate investor applies for a new loan or refinances an existing mortgage, lenders utilize the debt service coverage ratio as one of several factors to determine the maximum loan amount.
The greater the DSCR ratio, the higher the net operating income available to service the debt.
- Debt Service Coverage Ratio = Net Operating Income / Debt Service
For instance, if a rental property generates $6,600 in rent monthly and the monthly mortgage payment is $6,600 (principal and interest), the debt service coverage ratio would be:
- DSCR = NOI / Debt Service
- $79,200 Annual NOI / $79,200 Annual Debt Service = 1:1
A DSCR of 1:1 indicates the property makes sufficient income to service the monthly debt.
While there is no industry standard for a substantial debt service coverage ratio in real estate, many lenders and real estate investors will strive for at least a 1:1 coverage. This indicates that, at the very least, the asset covers the minimal amount to service all debt payments.
While the debt service coverage ratio isn’t the only metric assessed when obtaining an AMIRM loan, it is an essential part of the approval process.
Why should you use AMIRM?
Self-employed borrowers often have complicated tax returns or income statements. Instead of a long-drawn-out dissection of your income, you can now simply qualify off the rental income. Period. We won’t ask for tax returns, pay statements, etc. If the property qualifies, the loan is normally approved. If you currently own U.S. property with positive cash flow but are concerned your personal income won’t allow you to release equity or apply for a lower rate, you can now qualify for a loan with your rental income! What better time than now to refinance your property? If these reasons have yet to convince you, here are a few more:
- Applying for a new loan? Qualify for a higher-yielding property using AMIRM.
- Investing in Commercial Property? Qualify with AMIRM.
- Identify profitable rental properties based on rental income. Qualify with AMIRM.
If you’re interested in learning more about AMIRM, speak to one of our professional America Mortgages’ loan officers or email us at [email protected]