Rental property financing allows you to purchase income-producing real estate. Lenders normally consider rent-to-income ratio, property cash flow and debt service coverage ratio to determine if a borrower-investor can afford mortgage payments and cover 신용카드현금화 operating expenses.
Credit score requirements and down payments are higher for investment properties because lenders view them as riskier investments than primary residences. Some investors bypass the bank altogether by forming a real estate limited partnership or LLC.
1. Conventional Loans
Conventional loans are mortgages that don’t involve the government and offer more flexibility than government-backed loans. They also usually have lower interest rates than government-backed loans.
For conventional loans, your personal credit score and loan-to-value ratio determine whether you qualify for a mortgage. You can also pay for discount points to enjoy lower mortgage rates for the life of your loan.
Borrowers with a good credit history who meet lender requirements can qualify for conventional loans to buy investment properties. Some lenders require that borrowers have six months of rental income in savings before loaning money for an investment property purchase. Others use actual or projected future rental income to calculate mortgage payments.
Conventional loans are available in a variety of terms, including adjustable-rate mortgages. ARMs start with a promotional adjustable rate and then re-adjust periodically, usually based on a financial index. Some conventional loans, such as the Freddie Mac Home Possible mortgage for qualified low-income borrowers and the Fannie Mae HomeReady mortgage for credit-worthy low-income borrowers, allow a 3% down payment financing option.
2. FHA Loans
FHA loans allow you to buy a rental property that you plan to use as your primary residence. To qualify, you must meet basic requirements such as having steady income and a credit score above 500, and you must prove that the property will cover your mortgage payments. You’ll also need to be able to document the source of funds for your down payment, and you’ll be required to provide pay stubs, bank statements and tax returns.
FHHA loan limits are set annually by HUD, and you’ll be required to pay a mortgage insurance premium upfront and an annual premium. You can choose to pay the upfront premium in cash, or you can wrap it into your loan balance.
Lenders must evaluate both your front-end and back-end debt-to-income ratio, which must be lower than 31 percent of your gross monthly income for the new mortgage plus all other monthly debt payments (including auto loans, student loans and credit card balances). Compensating factors like cash reserves, income from other sources and a desirable location can help offset an unfavorable DTI or credit score.
3. VA Loans
If you’re a military veteran, active duty service member or the spouse of one, you’ll likely qualify for a VA home loan. This type of mortgage has unique benefits, including 100% financing and lower interest rates than conventional loans.
In addition, VA borrowers don’t have to pay PMI (private mortgage insurance) like they do with FHA and conventional loans. This can save borrowers thousands of dollars over the life of the mortgage.
As with any mortgage, there are eligibility requirements for VA purchase loans. The lender will verify your income and other financial information to make sure you can afford the loan. You’ll also need to prove you have enough assets to cover your down payment and closing costs. It’s wise to keep these funds in a high-yield savings account, such as Western Alliance Bank or UFB Secure Savings. Ideally, you’ll get preapproved before you start shopping for homes. This will show real estate agents and sellers that you’re a serious buyer with the ability to close on time.
4. Blanket Loans
Many real estate investors who have a large portfolio of residential rental properties may benefit from blanket loans, which are a type of package mortgage. These loans combine the mortgages on all the rental units into a single loan, allowing you to manage the properties as one unit and reduce the time and costs associated with handling multiple separate mortgages.
To qualify for a blanket loan, you will need to have a strong credit profile and a solid real estate investment history. You should also work with your lender to structure the loan based on your investment goals and objectives. Legal guidance is crucial to ensure that the loan structure is effective.
While a blanket loan can help you streamline your real estate portfolio and make it easier to manage, it does have its risks. For instance, if you default on just one property, you risk losing all the properties that are tied to the loan.