Tag Archive for: personal credit score

The ABC’s of DSCR loans: What every investor should know

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The ABC’s of DSCR loans: What every investor should know 

Do you need additional income for rental properties without the hassle of tons of paperwork or long processing times? Let’s take a closer look at the ABC’s of DSCR loans and how they can help. There is no need for employment history, and better yet there are only a few factors that are needed to qualify. DSCR, also known as the debt service coverage ratio, calculates whether or not a property breaks even or better yet, has a positive cash flow. These investors only loans are not only simple to apply for, but they can also be used for properties that have 1 to 4 units. Larger unit sizes can also apply, however, there are normally only a few available. DSCR loans are an excellent way for investors to get a 30-year product without worrying about how long they have been in business, their income, or even their business income. 

What three factors impact DSCR loan approval? 

1. Income from the property

The main factor that impacts an approval for a DSCR loan is income. When an investor is buying a property, the lenders will look at personal income, business income, or both. In almost all cases, lenders require two years of taxes showing a businesses income prior to approval. If you are a new investor, or like to write everything off, you will not meet the necessary requirements to apply. This is where a DSCR loan comes into play. The only thing that is taken into account, is whether or not you are going to break even with the rental property. The lenders will then look at the mortgage payments, property taxes, property insurance, HOA, and flood insurance to determine if you are eligible.

2. Your personal credit  

Especially in the real estate industry, your credit score plays a huge role in your success as an investor. Here at The Cash Flow Company, we see investors who struggle to pay bills on time, overuse credit cards, and don’t use enough credit. This greatly affects your personal credit scores. What can you do to get things turned around? The most important thing is to separate your personal credit from your business expenses to raise credit scores. In turn, it will allow for better rates with better terms for future investments. 

3. Loan to value

The loan to value, or LTV, is the amount of the mortgage compared to the value of the property. Most DSCR loans have a max LTV set to 80% for purchase, as well as rate and term refinances. This percentage then changes to 75% LTV for cash out refinances.  LTV’s can go 5% higher with the right factors, but investors should expect to pay a higher rate. In summary, the lower the loan to value, the less risk for the lender.

DSCR loans are incredibly helpful for investors who need additional income for rental properties. Not only are they fast and easy to apply for, but they also allow you to apply before your investment property is up and running. This is done by appraising properties in the current market and estimating the rent. In doing your research and estimating your cash flow, the sky’s the limit for success! Would you like to find out more and see if DSCR loans are right for you? Use our DSCR calculator to see the impact a DSCR loan can have on your investments.

Find out more about DSCR loans by watching our most recent video. 

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Why You Need a Good Credit Score TODAY

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Why You Need a Good Credit Score TODAY

Today, we’re diving into why having a good credit score is important. Especially now, when getting a loan is more competitive than ever, you need to have a good score. Let’s explore why it matters and how you can improve it quickly.

The Loan Landscape is Changing

In the past, getting a loan was like picking apples from a tree, easy and abundant. However, now, the economic landscape has tightened. Imagine the loan market shrinking from a big ocean to a small puddle. Consequently, only the best credit scores float to the top, and are getting the attention of lenders.

Why Your Credit Score Matters

Faster Loan Approvals

Having a good credit score is like having a VIP pass. Lenders use computer models to sort through applications quickly. If your score is high, you get moved to the front of the line. As a result, your loan gets processed faster, and in turn helps you snag that investment property before someone else does.

Better Loan Terms

A higher credit score doesn’t just get you faster service, it also gets you better terms as well. This can mean lower interest rates as well as more favorable loan conditions. Over time, these benefits add up to significant savings.

Personal Credit vs. Business Credit

The Impact of Personal Credit

Many business owners and real estate investors often use personal credit cards for their expenses. Unfortunately, this can negatively affect your score because personal cards report to your personal credit score. High balances or late payments can also bring your score down.

The Benefits of Business Credit Cards

Switching to business credit cards can make a big difference. To clarify, business cards don’t report to your personal credit score as long as you pay on time. Therefore, you can use them freely without worrying about hurting your credit. Plus, business credit card companies often reward you for using your card. Personal credit card companies on the other hand might lower your limit if they see high usage.

The 911 Loan: A Quick Fix

If you need a quick boost to your credit score, a 911 Loan can help. This loan is designed to improve your score fast, getting you in shape for better loan terms. But it doesn’t stop there. After the 911 Loan, it’s important to set up your finances correctly. This means moving to business credit cards as well as managing your credit smartly. By doing this, you can prevent future issues and save a lot of money in the long run.

Real-Life Savings

Imagine missing out on a prime property because your loan didn’t get approved in time. Or paying 2% more in interest over the next 30 years. These scenarios cost real money, which can sometimes be tens or hundreds of thousands of dollars. Thus, a good credit score can help you avoid these costly mistakes.

Conclusion

Your credit score is more important than ever. With the loan market tightening, having a good score can mean the difference between getting the funding you need and missing out. By understanding the impact of your credit choices and making smart moves, you can set yourself up for success. So, take the time to improve your credit score today! It’s an investment in your future.

Watch our most recent video to find out more about: Why You Need a Good Credit Score TODAY</b>

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Business Credit vs. Personal Credit: What’s Better?

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The struggle of business credit vs. personal credit cards is the #1 thing slowing real estate investors down.

Especially in the beginning, it’s tempting to use personal credit cards to kickstart your investing adventures.

However, the use of personal credit cards on investment projects can ultimately cause significant harm to your dreams of building wealth.

The Risk of Personal Credit Cards

Using personal credit cards for the type of large-scale spending necessary in real estate investing drives up usage. 

Your credit score is calculated based on two factors: funds available and usage. High usage tanks your credit score fast. A low score can significantly damage terms of loans and your overall ability to grow your investment business. 

A Better Alternative

In order to protect your credit score, consider switching your investment spending to a business credit card.

This separates your investment usage from that personal credit score. 

Additionally, since these cards don’t penalize high usage, you can run up the balance as long as you pay it off on time. In fact, consistently high usage and good payment history can even result in the bank raising your spending limits on that business card.

Getting a business credit card is easy, and with this simple change, your personal credit score is protected. If you have a good score, lenders can confidently offer better rates and terms which will save you a lot of money in the long run.

What to Look for in a Business Credit Card 

Here’s the good news: shopping for a business credit card isn’t all that different from looking for a personal one!

  • Look for 0% interest and benefits the same as you would on a personal card.
  • Make sure you know whether or not that card will report. To protect your credit score, you’ll want to find one that doesn’t.
  • Remember: You still need to pay your bills on time. Many business cards will start reporting if you have late or missed payments.

 

Read the full article here.

Watch the full video here:

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Personal vs. Business Credit Cards: What’s Better for Investing?

Categories:

The struggle of personal vs. business credit cards is the #1 thing slowing real estate investors down.

Especially in the beginning, it’s tempting to use personal credit cards to kickstart your investing adventures.

However, the use of personal credit cards on investment projects can ultimately cause significant harm to your dreams of building wealth.

The Risk of Personal Credit Cards

Using personal credit cards for the type of large-scale spending necessary in real estate investing drives up usage. 

Your credit score is calculated based on two factors: funds available and usage. High usage tanks your credit score fast. A low score can significantly damage terms of loans and your overall ability to grow your investment business. 

A Better Alternative: Business Credit Cards

In order to protect your credit score, consider switching your investment spending to a business credit card.

This separates your investment usage from that personal credit score. 

Additionally, since these cards don’t penalize high usage, you can run up the balance as long as you pay it off on time. In fact, consistently high usage and good payment history can even result in the bank raising your spending limits on that business card.

Getting a business credit card is easy, and with this simple change, your personal credit score is protected. If you have a good score, lenders can confidently offer better rates and terms which will save you a lot of money in the long run.

Requirements for Business Credit Cards

Business credit cards are one of the best ways to make real estate investing easier and more profitable. But what do you need before you start looking for a business credit card?

1. A Business

Typically, you need to have an operating business for at least a year (though there are exceptions)  before applying for a business card. 

This isn’t quite as tricky as it may sound. You need a business account, website, billing information, etc. Essentially, you need proof that you are, in fact, operating an investment business. 

2. A Good Personal Credit Score

Even though you’re applying for a card that won’t report on your personal credit score, approval for the business card is based on your personal credit score.

If you need to raise your personal credit score before applying for a business card, we can help you with that! Usage loans essentially transfer some of that credit card spending into a separate loan that won’t tank your credit score.

Both we and our sister company Hard Money Mike offer usage loans.

3. 1–2 Personal Credit Cards

Obviously, you will need to use your personal credit cards for your investment needs in the beginning. However, if you’ve been using those well, then banks are more likely to approve a business credit card.

All in all, if you have a business, a good credit score, and a couple of credit cards already, it’s fairly easy to start the process of switching to business cards. 

What to Look for in a Business Credit Card 

Here’s the good news: shopping for a business credit card isn’t all that different from looking for a personal one!

  • Look for 0% interest and benefits the same as you would on a personal card.
  • Make sure you know whether or not that card will report. To protect your credit score, you’ll want to find one that doesn’t.
  • Remember: You still need to pay your bills on time. Many business cards will start reporting if you have late or missed payments.

Tools to Help You Find the Right Card

We want to make it easy for you to succeed as a real estate investor—no strings attached. The more you know and the more resources you have, the better equipped you are to find the right deals for you.

We’ve already done some of the work for you:

1. Business Credit Card Marketplace

Here at the Cashflow Company, we’ve partnered with Nav to help you find the right business card for you. By inputting a few pieces of information, we’ll let you know what cards match your needs (and won’t report on your personal credit score).

2. Credit Score Checklist

You can use our free credit checklist download to check the health of your credit score. What can you do to improve that score? Does it need some CPR? What are your options?

3. Other Real Estate Investing Tools

Explore our other tools to optimize your investment strategy. We have various calculators, questionnaires, optimizers, and analyzers to walk you through the various steps of the game.

Contact Us!

Credit scores are a very important piece of leverage. We want you to feel equipped and confident that you’re protecting that credit score in a smart way.

If you want to discuss your credit score, a usage loan, or business credit cards, contact us at Info@TheCashFlowCompany.com. We’re always happy to help!

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