Are you ready to take on the responsibility of being a landlord? If you are, then it is important to understand what is required of you. You need to be prepared for any emergency that may arise. There are many things that lenders look at when considering your application for an investment property loan. Here are some of the most important things to know about investment property loans:
What is an Investment Property Loan?
An investment property loan is a type of mortgage that can be used to purchase an investment property like a house, condo, or apartment. This is usually in addition to your primary residence.
Minimum Requirements for Mortgages
Most lenders require that your down payment is at least 20% of the purchase price or appraised value. You may need to pay points up front for a lower interest rate. For example, if you have an 80% loan-to-value ratio, you would have to pay two points on top of your 5% down payment for a 3.5% mortgage rate.
Down Payment Requirements
You may have heard the old saying, “cash is king.” Unfortunately, for mortgages, this is not true. You’ll need to put down a down payment in order to get an investment property loan.
The amount of the down payment required varies depending on your credit score and/or income, but it typically ranges from 5% to 20%. The higher your credit score, the lower the required down payment.
The good news is that you don’t need to pay the whole down payment upfront. As long as you can provide proof of funds (in other words, show where you plan on getting the money), you may be able to make monthly payments while still living in your home or renting an apartment.
Some lenders may require that you live close enough (within 30 miles) to the property for which you are making payments. This depends on whether or not they want their collateral protected in case something goes wrong with your investment property loan.
When applying for an investment property loan, you need to make sure that your income meets the lender’s requirements. The lender will want to know about your ability to pay them back. This is one of the main factors that they will look at when deciding whether or not to approve your application for a loan.
If you are self-employed, it can be difficult if you don’t have tax returns for the last few years. The lender may require you provide information about your business and then they will decide if they would like more information before approving your application for an investment property loan. If you are employed, the lender will want to know details about your income and its documented. They may also request tax returns to confirm steady income over time.
DFW Specialty Lending offers investment property loans in the Dallas/Fort Worth area. They are committed to providing you with the best service, options, and rates for your needs. Whether you’re looking for a commercial mortgage, an FHA loan, or something else on this site, they have it all. Call them today or visit their website to learn more about what they can do for you!
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