Stated Income Tax Returns for Multi-Family Purchase

[REInvestors888]

Hi,

A colleague with stated income tax returns is interested to purchase a decent size multi-family building. But, according to his mortgage broker, he is not qualified because of stated income tax returns. This guy has money for a 10% down payment. Is this really true? What are his options to purchase and finance a multi-family building?

Thanks a lot for your expert advice.

 

[Thomas Beyer]

To buy a multi-family building you need at least 20-25% cash, or in many larger cities 30-35%. Banks also look for 25% networth of the loan amount of the principal as a guideline. They always underwrite an asset first, based on a DCR of 1.25 or so, and once the building is approved they look for the principal owner for a personal guarantee, and if that owner is financially weak they will decline him/her, or lower the loan amount.

10% down is doable if you get a VTB from the seller, but banks will look even more carefully at loan amount and principal.

As always, the golden rule applies: he who has the gold makes the rules.

 

[REInvestors888]

Thanks a lot, Mr. Thomas.