What is a Business purpose program?

A Business Purpose Program is a loan program designed solely for business income purposes. This type of loan is typically extended to seasoned real estate Investors using non-occupant residential properties (up to four units) for collateral.

Business Purpose loans are qualified on rental income (cash flow) from the property by considering the debt service coverage ratio (DSCR), also known as debt coverage ratio (DCR). Typically, the mortgage payment on the property will be covered by the rent received, which should produce a DCR score of 0.90 or greater.

Because of their business purpose, it’s important to note these loans are not subject to TRID guidelines. TRID is the merger of both the Truth in Lending Act (TILA) and the Real Estate Settlement Procedures Act (RESPA), commonly referred to as the “Know Before You Owe” mortgage disclosure rule. Overseen primarily by the Consumer Finance Protection Bureau (CFPB), the required disclosures and specific timing are required for lending to Consumers, not Investors. This is good news for Investor Clients, enabling greater speed to closing.