ira mortgage

							                   Leveraging the IRA (Non-Recourse Loans)

The IRS does not permit the IRA owner to personally guarantee a mortgage for the purchase of property
with their IRA. The majority of banks that issue mortgages require a personal guarantee for those loans.
Under normal circumstances, if the mortgagee (property owner) cannot or does not meet the payment
requirements of the mortgage, the bank can use whatever legal means at its disposal to obtain payment
from the mortgagee. The bank can sue the property owner and obtain that individual's personal assets to
satisfy the mortgage debt. As a result, most banks will NOT lend money to purchase real estate through an
IRA, because they cannot obtain that personal guarantee from the borrower. The only 'recourse' the bank
has to satisfy the mortgage debt incurred by the IRA is the property and the rental revenue that the property
generates. Therefore, the IRA owner must obtain what is called a NON-RECOURSE loan in order to
purchase real estate if they cannot pay the entire purchase price in cash.


The use of non-recourse loans in conjunction with IRAs is relatively new. However, there are many lenders
now seriously considering the non-recourse loan to an IRA. Historically, the risk to the lender is negligible.
Non-recourse loans are also less cumbersome. There is no income verification and the rate is not based on
any credit report or credit scoring. It is also possible to refinance a property that an IRA already owns with
the proceeds being returned to the IRA account. Closing costs and associated fees are similar to traditional
recourse loans.


While there are a number of lending institutions that will consider non-recourse loans, we recommend you
start with the North American Savings Bank (NASB). NASB lends in all 50 states and are very familiar with
self-directed IRAs. Follow this link to NASB:IRALENDING.COM. Also, the Pacific Crest Savings Bank in
Washington: www.paccrest.com and Freemont Bank in California: Fremont Bank - Self-Directed IRA Real
Estate Loan Program offer non-recourse loans. Simply call the listed telephone number and ask to speak to
someone who handles non-recourse loans for IRAs.

Required documentation               Loan guidelines

Loan Application                     Max Loan to Value = 70%
Purchase and sale contract           Max Term = 20 to 30 Years
IRA statement                        3/1 & 5/1 & 7/1 ARM's
Appraisal                            Income /Expense ratio= 1.25
Rent roll                            3 to 6 months reserves

Eligible Properties                  Ineligible Properties

Single Family Residence              Mobile Homes
Certain Condos                       Time Shares/Condo Hotels
2 – 4 Plex                           Certain Restaurants
Multi-Family (5+ units)              Residences w/ 5+ acres
Retail/Office/Warehouse              Farms