When it comes time to collect capital to move forward either out of a property or to reinvest into the property, financing is essential. Through a consideration of the various debt instruments that might be available for you to play whatever you’ve decided upon, the best strategy that will be music to our ears is identified. In this article, we are going to discuss 3 reasons why you might consider getting a no doc loan for your investment property.
The No Doc Loan
Prior to presenting the variety of reasons to get a no doc loan for your income-generating property, we’ll first briefly lay the foundation by covering what a no doc loan. So what is a no doc loan you might ask? It is a loan for which there is no requirement that the income of the applicant be verified. This means that even without an income, it is possible that an individual could acquire a loan, generally if that loan is secured by an interest in property that can be reclaimed in the event the debtor defaults on the loan.
The no doc loan was relatively common during the housing boom as a means of opening the door to homeownership to more individuals, although their capacity to pay as the scandals have proven were at times exaggerated at best by the banks lending the money, feeding the foreclosure wave of the mid-00s. For personal homes, the use of a no doc loan can lead to the purchasing of a home beyond one’s income and capacity to repay, opening the door to a path straight towards foreclosure. Income properties, however, are different, as we’ll explain below beginning with #1: To Make Money.
3 Reasons To Get A No Doc Loan For Your Investment Property
The decision to purchase an investment property can be quite wise, depending upon the type of investment. An investment property generally means that it is purchase for the purpose of generating income. Now, to some individuals, this might mean flipping houses, in which ownership is taken, money is sunk into the home that is owned, then it is resold to a buyer paying a premium for the repairs, ideally leading to a profit. This is behavior for individuals with excessive capital an the ability to absorb risk and loss. For our purposes here, we’ll consider an investment property to be an income-generating property.
#1 Make Money
The purpose of an investment property is to make money, and if the investment is sound, it will have profit potential and already be driving income. For example, using a no doc loan to acquire a property that is outside of your earnings capacity for a slightly higher interest rate is a worthwhile transaction if the value of the income generated by the property exceeds your mortgage costs to an acceptable margin of profit. Leveraging a no doc loan into the ownership of an income producing property can be an intelligent method of leaping credit barriers to take advantage of a viable investment opportunity.
#2 To Balance Out Income Variations
If you are a self-employed individual whose income may vary widely from day-to-day or from year-to-year, and so traditional forms of income verification may not lead to the painting of a financial picture that lenders want to hang on their wall. For those persons with the capital to make down payments and to demonstrate liquidity, but not a regular income, the no doc loan is a fine option to capitalize upon an investment opportunity without having to provide income documentation.
#3 Leverage Your Credit
Have you painstakingly managed your credit throughout college, managed to graduate, and are now just getting started on our career and finding a lack of income history keeping you from your dream house as your bank account drains away into rent? Look into the no doc loan as you can leverage your positive credit without an income history to get those keys and into that home. An impressive credit score without income or an employment history can preclude you from many traditional loan formats, but the no doc loan can put you in a home now as your career builds, so your equity in your home builds with it.
The increase in the availability of the no doc loan might open the door for you to take advantage of a unique income-based real-estate opportunity that the viability of the opportunity might justify, but your income would not support through a traditional loan application. To jump on the opportunity and learn more about how to leverage no doc loans, reach out to AS-IS Loans, your source of information on opportunities and the financing you need to take advantage of them.