What are the requirements to get an investment property loan? In order to qualify for an investment property mortgage loan, how much money do you have to put down? These are good questions, let's take a look. Usually, if you want to get a loan for an investment property, you'll have to put at least 20% down. These more risk to the lender with a property that's not owner occupied. But let's see where you should get your loan...
There are literally thousands of mortgage lenders, and each one has several different loan stipulations and contracts. There are lenders who only cater to the most creditworthy (and offer the best rates), and there are lenders who lend 50% of a property’s value (offered at high rates). There are also lenders who help you refinance a loan to a lower rate.
Yes, banks or loan companies are happy to lend you money if you have good credit, but the key is buying the right property and not getting a risky mortgage with a high interest right - or one that adjusts when you're not ready.
Reminder: If possible, one of the best things to do if you're just starting out as a real estate investor, is to purchase your property and live in it for one year and then rent it out - turn it in to an investment property. If you buy as an owner occupant, use the property as your personal residence, you can qualify for a better interest rate and not have to put down as much money for the down payment.
Through the Federal Housing Administration (FHA) or U.S. Department of Housing and Urban Development (HUD), you should be able to qualify for a lower interest rate and not have a large down payment to make. Yes, you will have to live in the house for one year though, there is no getting around this.
But there are a wide range of lenders with different requirements to choose from if you don't want to buy the property as an owner occupant and live in it for one year.
Basically, there are lenders for everyone, but why settle for a lender who gives you lousy rates? You’ll only do yourself a disservice if you settle, so it’s important to get the best loan you can.
Along with a variety of mortgage brokers, there a number of different types of loans at different interest rates and lengths of time, the short the loan the higher the rate. Try this mortgage calculator to get an idea of what you'll be paying in interest based on the length of your mortgage. Also, there are a number of ways to finance the purchase of a property you want to buy.
The best place to go is the bank—banks love to lend people money. They want to earn more customers and benefit from the interest rates that loans accrue. But sometimes, certain banks will not have a program that fits your needs, or you might not place within the parameters of their lending ability. Or worse: Some banks might try to tie you into a mortgage loan that doesn’t fit your needs.
But worry not. In this day and age there's more access to information than there's ever been. With the Internet you can search for a loan online and read the details of what each bank and lender offers on their websites. You can also scan the real estate section in the local newspaper for the rates offered by other regional banks or lenders. Give them an initial phone call, then setup a meeting if you feel like this is someone you want to work with.
It doesn't cost any money to have a meeting. Go into the meeting saying you're trying to gather information. Plus, face to face meetings are good to see if this is someone you want to work with and or have a future relationship with for other deals.
To simplifiy things, you can often get a loan via your own bank, from Well Fargo to Bank of America, most banks also have a mortgage business. There are special discounts for first time home buyers and various mortgage products that they'd be happy to help you with since they want your business.
By doing your own legwork you can get a feel for what is out there, and also have a clearer understanding of how everything works. There's no need to rush, start doing your legwork early and ask a lot of questions.