What is an investment property loan?
Investment property loans are used to purchase second homes or investment properties.
Loans for investments are riskier than those for a primary residence since default is more likely.
As a result, you must demonstrate that you are in great economic condition.
When it comes to acquiring investment properties, you have numerous options.
LOAN OPTIONS:
The only standard loan program that lets you buy an investment property without having to live in it.
Allow you to buy a 2-4 unit home with a mortgage backed by the FHA and collect the rent of the other homes, as long as you reside in one of the units.
A loan that allows you to use the equity of your home as collateral.
Is when you take out a mortgage for more than you owe and pocket the difference in cash, which can be used to purchase an investment property.
Hard money loans are common among house-flipping investors. You can expect hefty interest rates and a down payment of 25%.
If you plan on getting an investment loan here is how it works :
- Look for an investment property mortgage lender. You can ask your real estate agent for guidance on finding the best one.
- Fill out a loan application. If you are applying for a conventional loan, FHA loan, or VA loan the process is similar to any other loan.
- Provide extra asset documentation. Have two months of bank statements and any rental information on the property you are purchasing.
- Pay for an investment appraisal. A home appraisal helps you estimate the value of your home.
- Review your closing disclosure. After the loan conditions clear and the appraisal is completed the lender will issue a closing disclosure three days before closing. It is critical that you review all the numbers and make sure that they are correct.
- Gather your funds and close. You will wire or use a cashier’s check for your closing funds. Once the mortgage papers are signed, your loan funds are sent, the property will be recorded under your name.
Investment
loan
requirements:
- A sizable down payment, lenders require
20%.
- Mortgage reserves. (This means that
you should have enough cash or
assets to help cover 6 months of
mortgage payments.)
- Proof of rental income. (ex. include rent
roll history, current leases, and tax
returns.)
- Rental revenue may be utilized as a
means of qualification. A lender could
potentially let you add the actual or
anticipated rental income from the home
you're buying.
- History of property management.
(Property documents or tax returns are
acceptable.)
- High credit score. The minimum credit
score for an investment property
mortgage is 640.
If you purchase a multi-unit home, the minimum credit score is 700.
