Fill in the Fields that are "Blue" in color.

Using this Qualifier

This calculator is used initially to ascertain if the income property has the necessary cash flow to qualify for the loan amount requested.

The 'Gross Monthly Rent' is going to be an important field. Without this number, the formula will not work. It is important to use the Gross Monthly Income and not the Net Operating Income the Seller is providing. Every landlord will run their property within different expense ratios. For underwriting purposes, my experience leads me to input at least 40% against the Gross Monthly Income as an Expense Ratio.

The 'Interest Rate' should be thought of as the Qualifying Rate a lender will use to Stress Test the income stream. While an interest rate might carry a 4.5% rate, the Stress Rate to qualify cash flow is usually higher when determining the Debt Service Ratio. Some lenders may Stress Test their income streams at a 6% rate. This could lead to substantially lower loan dollars available for financing. For the Stated Income stress rate, use 4% for the 3 year and 5 year fixed rate programs and the stated rate for the 7 year and 10 year fixed rate programs.

The 'Property Debt to Service Ratio'. Ths number is the result of taking the Net Operating Income / Monthly PI Pmt. For the Stated Income Apartment Loan program, this number can go down to as low as 1.15. Usually though, you should aim for a 1.25 Debt to Service Ratio to qualify for the majority of loan programs.

The 'Cap Rate' field represents your geographic capitalization rate. Basically, if you bought the property in an all cash transaction, what would be percentage cash return on your investment. So for example you buy a $1MM apartment all cash. After expenses, you profit $50K. Divide the return by the purchase price and you have your cap rate of 5%. Beach Cities might garner a 5% cap rate for investors, while properties in the interior of the State might garner 6.5% cap rates. Input your geographic cap rate to calculate an estimated value.

For general underwriting, use a 40% expense ratio against the income to determine the NOI. Divide the NOI by the Cap rate and you arrive at an estimation of property value. Take that same NOI and divide it by the Mortgage payment to calculate the Debt to Service Ratio.

The 'Gross Monthly Rent' is going to be an important field. Without this number, the formula will not work. It is important to use the Gross Monthly Income and not the Net Operating Income the Seller is providing. Every landlord will run their property within different expense ratios. For underwriting purposes, my experience leads me to input at least 40% against the Gross Monthly Income as an Expense Ratio.

The 'Interest Rate' should be thought of as the Qualifying Rate a lender will use to Stress Test the income stream. While an interest rate might carry a 4.5% rate, the Stress Rate to qualify cash flow is usually higher when determining the Debt Service Ratio. Some lenders may Stress Test their income streams at a 6% rate. This could lead to substantially lower loan dollars available for financing. For the Stated Income stress rate, use 4% for the 3 year and 5 year fixed rate programs and the stated rate for the 7 year and 10 year fixed rate programs.

The 'Property Debt to Service Ratio'. Ths number is the result of taking the Net Operating Income / Monthly PI Pmt. For the Stated Income Apartment Loan program, this number can go down to as low as 1.15. Usually though, you should aim for a 1.25 Debt to Service Ratio to qualify for the majority of loan programs.

The 'Cap Rate' field represents your geographic capitalization rate. Basically, if you bought the property in an all cash transaction, what would be percentage cash return on your investment. So for example you buy a $1MM apartment all cash. After expenses, you profit $50K. Divide the return by the purchase price and you have your cap rate of 5%. Beach Cities might garner a 5% cap rate for investors, while properties in the interior of the State might garner 6.5% cap rates. Input your geographic cap rate to calculate an estimated value.

For general underwriting, use a 40% expense ratio against the income to determine the NOI. Divide the NOI by the Cap rate and you arrive at an estimation of property value. Take that same NOI and divide it by the Mortgage payment to calculate the Debt to Service Ratio.