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Interest-Only Loans in Merced
Interest-only loans let you pay just the interest for 5-10 years before principal payments begin. Most Merced borrowers using these are investors managing cash flow or high earners expecting income growth.
This is a Non-QM product, meaning approval focuses on assets and investment strategy rather than W-2 income. You need strong reserves and equity to qualify.
Expect to put down at least 20-25% in Merced. Lenders want 12-24 months of reserves covering future principal-and-interest payments, not just current interest-only amounts.
Credit scores typically need to hit 680 minimum, though 700+ gets better pricing. Self-employed borrowers can use bank statements instead of tax returns to document income.
Only specialized Non-QM lenders offer interest-only loans—your local bank won't touch them. Rates run 1-2% higher than conventional loans because these carry more risk.
Shopping across our 200+ lenders matters here. Pricing and reserve requirements vary widely between Non-QM investors. One lender might require 24 months reserves while another accepts 12.
I see two Merced borrowers use these: investors buying multiple rental properties who need lower payments to maintain positive cash flow, and business owners with lumpy income who plan to refinance or sell before the principal kicks in.
The math only works if you have a clear exit strategy. When that 10-year interest-only period ends, your payment can jump 40-60%. You need a plan to refinance, sell, or handle the higher amount.
If you own rental property in Merced, compare this to DSCR loans. DSCR uses rental income to qualify and offers fixed rates, while interest-only focuses on reserves and usually adjusts after 5-7 years.
Adjustable Rate Mortgages give you low initial payments too, but you're paying down principal from day one. Interest-only makes sense when you need maximum cash flow now and have liquidity to weather payment increases later.
Merced's market doesn't support interest-only for primary residence buyers. Home values here don't appreciate fast enough to justify paying zero principal while betting on future equity gains.
This loan makes sense for Merced investors buying multiple single-family rentals or small multifamily properties. Keep 6-12 months operating reserves per property beyond what the lender requires.
Your payment increases to cover both principal and interest over the remaining loan term. Most borrowers refinance or sell before this happens.
Yes, though lenders calculate qualification differently than DSCR loans. They typically count 75% of projected rent and require larger reserves.
No, because you're putting down 20-25% minimum. These are portfolio loans with built-in risk pricing instead of mortgage insurance.
Absolutely. Bank statement programs work well here since you're not qualifying under traditional debt-to-income rules.
Most are adjustable after the initial fixed period. Some lenders offer 5-7 year fixed interest-only, then the rate adjusts annually.
Mortgage financing for independent contractors and freelancers who earn 1099 income instead of traditional W-2 wages.
Mortgage programs that allow borrowers to qualify based on liquid assets rather than traditional employment income.
Non-QM loans that use 12 to 24 months of bank statements to verify income for self-employed borrowers.
Short-term financing that bridges the gap between buying a new property and selling an existing one.
Debt Service Coverage Ratio loans that qualify investors based on a rental property's income rather than personal income.
Mortgage programs designed for non-US citizens and non-permanent residents who want to purchase property in the United States.
Asset-based short-term loans primarily used by real estate investors for property acquisition and renovation projects.
Financing solutions tailored for real estate investors purchasing rental properties, fix-and-flip projects, or investment portfolios.
Home loans for borrowers who have an Individual Taxpayer Identification Number instead of a Social Security number.
Adjustable rate mortgages held in a lender's portfolio rather than sold on the secondary market, offering more flexible terms.
Non-QM mortgages that use a CPA-prepared profit and loss statement to verify income for self-employed borrowers.
Home loans with interest rates that adjust periodically based on market conditions after an initial fixed-rate period.
Specialized mortgage programs designed to support homeownership in underserved communities with flexible qualification criteria.
Mortgages that meet the guidelines and loan limits set by Fannie Mae and Freddie Mac for secondary market purchase.
Financing for building a new home or making major renovations, typically converting to a permanent mortgage upon completion.
Traditional mortgage financing not backed by a government agency, offering flexible terms and competitive rates for qualified borrowers.
Innovative loan products that leverage projected home equity growth to provide favorable financing terms.
Government-insured mortgages from the Federal Housing Administration with low down payments and flexible credit requirements.
A revolving line of credit secured by your home equity that allows you to borrow funds as needed during a draw period.
A fixed-rate second mortgage that provides a lump sum of cash by borrowing against the equity built in your home.
Mortgages that exceed the conforming loan limits set by the FHFA, designed for financing high-value luxury properties.
Loans for homeowners aged 62 and older that convert home equity into cash without requiring monthly mortgage payments.
Government-backed zero down payment mortgages for eligible rural and suburban homebuyers who meet income limits.
Government-guaranteed mortgages for eligible veterans, active-duty service members, and surviving spouses with zero down payment.