What is an Investment Property?
1/2 Point Loan
OriginationAn investment property is a real estate property that has been purchased with the intention of earning a return on the investment (purchase), either through rental income, the future resale of the property, or both. The most common is a Non-Owner-Occupied residential house used as a rental property. The property can be owned by an individual or a business such as an LLC. If the property is owned by a business, all owners or members of the LLC must personally guarantee the loan.
Financing is available for commercial buildings such as office space, restaurants, warehouses, and other commercial buildings from Workmen’s Circle Credit Union (WCCU). Similar to rental homes, the property can be owned by an individual or a business such as an LLC. If the property is owned by a business, all owners or members of the LLC must personally guarantee the loan. The commercial building can be owner-occupied or non-owner occupied. Or, it can be a mix of the owner & non-owner occupied.
The maximum loan-to-value (LTV) that WCCU will finance is 75%. If the member is purchasing a property, the maximum loan amount is 75% of the purchase price or appraisal, whichever is less. If the member is obtaining cash out, the maximum LTV is 70%. On all investment property loans, WCCU must have a 1st mortgage on the property.
FREQUENTLY ASKED QUESTIONS
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+ What are the advantages of using WCCU?
- Origination fee is only ½ point
- No Intangible Taxes are required when financing a mortgage through a credit union
- WCCU has the ability to be flexible on the approval decision. If the mortgage loan makes business sense to the Loan Committee, they will approve the request
- WCCU has competitive interest rates. WCCU has the ability to match the interest rate if the loan terms make business sense to the Loan Committee
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+ How do I start the loan approval process?
- Each person on the loan must complete a Personal Financial Statement and provide two years of their most recent personal and business tax returns
- An address of the property, the loan amount requested and a brief business plan for the loan proceeds should be provided. An appraisal will be required from a certified appraiser on WCCU’s approved appraiser list to validate the value of the property
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+ Who and what dictates whether the loans are approved?
- WCCU developed a loan evaluation system that analyzes character, collateral & capacity. 1) Character, which is basically credit scores; 2) Collateral (loan to value), which in essence requires a maximum loan-to-value of 75%. A down payment of 25% provides WCCU with a cushion in case there is an issue with the loan. Also, the 25% equity provides motivation to the member to make loan payments as agreed in the note and 3) Capacity, which is an analysis that documents that the member has the ability to make their loan payments as agreed
- The Loan Committee will evaluate the analysis of the loan underwriting and make a decision. It is not unusual for the Loan Committee to make a counteroffer instead of denying a loan. An example of a counteroffer could be a) a larger down payment, b) an additional guarantor, c) additional collateral or d) lower the loan amount. The Loan Committee wishes to make prudent and safe loans that make financial sense to the credit union and the member
Intangible Taxes
Members of credit unions, such as WCCU, do not pay intangible taxes on their mortgage loans. This saves the members $3/dollars per thousand of their loan amount from closing costs. Why do bank customers have to pay intangible taxes on their loan amount, but credit union members do not have to pay intangible taxes? It is because credit unions are considered non-profits and are therefore tax-exempt. These savings are passed on to the member. So, if the loan amount is $200,000, the members save $600 in intangible fees versus a bank customer.
Useful Links:
Complete the Personal Financial Statement to start your investment property loan. The form will need to be printed and provided to WCCU.
Or Call Us At: (912) 356-9225