Reduced Documentation Programs: A Solution for Borrowers with Tax Return Challenges


Traditional lenders in today’s market often require borrowers to provide their last two years’ tax returns to be approved for funding or refinancing. However, many times the tax returns may not reveal the current monetary success of a property. And of course if the tax returns don’t prove income to lenders, the borrowers will be denied.

Have you ever come across this situation in your business? Were you able to identify a solution for your client, or were you forced to refer the deal to someone else? The next time you encounter a small-balance commercial multifamily deal with tax return issues, don’t pass the buck. A reduced documentation product from a non-bank lender could help you close the deal yourself.

To help you better identify borrowers who could benefit from a reduced documentation program, let’s take a look at how our borrower, Carlos, came to finding the right program to fit his needs.

In early 2014, Carlos discovered an opportunity to invest in a multifamily property located in a rapidly-growing part of town. The property was underperforming due to mismanagement and the seller was very motivated to sell, so Carlos quickly secured funding with a bridge loan lender. If he didn’t act fast the seller was going to move on to a different buyer, so Carlos accepted a short term 14% interest rate to acquire the property.

While the previous owner struggled to lease up the property, Carlos assumed ownership right as the area began to see a surge in popularity. He undertook an aggressive repositioning plan and the property soon generated a healthy income.

As Carlos reached the end of his initial loan term, he hoped to refinance to get a lower rate and longer term loan. He also wanted to work with a lender that provided a more flexible underwriting process.

Carlos’ first stop was his local bank. He was more than happy to share rent roll documentation and other business financials, but when the bank asked for his tax returns dating back 2 years, he hesitated. While his property generated income, the tax returns did not yet reflect the property’s recent success.

He left the bank empty-handed and wondered if it was really necessary to disclose all that information to get a refinance for a small commercial loan. Carlos realized he would have trouble getting traditional funding on his own, so he decided to partner with a mortgage broker who was able to quickly identify his needs.

Carlos’ Needs

The Right Program for Carlos

Carlos’ broker has experience helping borrowers with multifamily properties in growing cities, and she knew bank financing was not the best route to take. At the same time, she knew that Carlos could do better than refinancing with another bridge loan.

His broker identified Silver Hill Funding’s Lite Doc Program as the ideal solution because it does not require tax return information or 4506-Ts, yet offers more favorable rates and terms than the typical bridge lender program. With Silver Hill, Carlos was able to get the more attractive rate he was hoping for by only providing the property’s rent roll and a few other business financials.

It’s important to remember that lenders exist between the two extremes of traditional banks and hard money lenders. If Carlos’ broker didn’t listen to his needs and investigate his options, she could have gotten a deal that didn’t meet each of her borrower’s needs.

Right now there are many cities growing and experiencing revitalizations. With that growth, investors like Carlos are looking to refinance with better rates and terms while their properties are generating income. Silver Hill’s Lite Doc Program allows credit-worthy borrowers to secure funding with a much simpler process and gives you more opportunities to close small-balance multifamily deals.

Remember Carlos’ story the next time you come across a small-balance multifamily deal.  Tax return complications don’t have to keep borrowers from the mortgage loan they need.  And they certainly don’t have to keep you from closing more deals.

If you spot any potential issues, you can save time by avoiding traditional bank options and going straight to a lender with a reduced documentation program like Silver Hill.

If you have a client who could benefit from a streamline program, become an approved Silver Hill broker and submit your deal to us.