Qualifying for a Non-Recourse Loan

While a full recourse loan is limited to the borrower, often requiring a personal guarantee, non-recourse loans are just the opposite.

With a non-recourse loan, the security for the loan is the property itself rather than the self-directed IRA or the individual. The lender can only recover the property in case of a foreclosure. They have no recourse against the self-directed IRA or the account holder.

During the application process, NASB considers three main variables when determining qualifications:

PROPERTY CONDITIONS:

Must be in rentable condition, and a marketable property

CASH FLOW:

Property must have a strong cash flow (typically 1.25 DSCR or greater)

IRA FUNDS:

Must have enough money available to cover the down payment, plus additional reserves

 

Eligibility & Down Payment Requirements

Anyone who has at least 30%-40% of the purchase price vested in a self-directed IRA has the opportunity to buy rental properties using a non-recourse loan. This is subject to loan approval, including an acceptable real estate appraisal, as determined by NASB.

The minimum down payment required for a single family home is 30%-40% of the purchase price and 40% of the purchase price for condos or 2-4 units. Insufficient cash flow or the condition of the property may impact down payment requirement.

 

Properties Eligible for Non-Recourse Financing

Eligible types of rental properties include:

▪  Single family detached residential

▪  Warrantable condos

▪  PUDs

▪  Duplexes

▪  4-plexes

▪  Multi-family (5 or more units).

 

For more information about IRA Lending, visit our IRA Lending FAQs.