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Mortgage Guidelines for Investment Properties



The financial benefits of owning an investment property are having an additional source of income for each month, owning a tangible asset and equity growth. There are two types of investment properties, one is the property where you can make instant profits, and another is a home where you can rent out in creating additional income for each month. If you keep an investment property for rental, you can have the benefit since the lodger will be paying the mortgage. However, you have to find a property that can generate a definite monthly cash flow.


Mortgage guidelines begin to ease off to create opportunities for each individual to purchase an investment property. Some standard guideline can help you in underwriting mortgage for your investment property. One is the loan term, there are only 15 or 30 years for fixed rate mortgage, and 7 or 10 years for variable rate mortgage products that are available.


Another is the down payment. The requirement for down payment ranges 15% to 25% in which your middle credit score will be the determining factor. It will also be determined by how many properties you owned and property type that you will purchase. A minimum of 700 credit score is required typically in the investment loans. If you have a middle credit score more than 740, they will offer you greater rates and terms.


Lenders normally offers financing an individual who currently own four mortgages or lower. Financing can be available to individuals who presently have mortgages of 5 to 10, but then you will be meeting additional requirements. Usually, a lender requires proof of rent loss insurance of six months to every investment property they will be financing. They will require at least six months payment reserves for mortgage in every investment property.


When the lender qualifies you for the investment loan, they comprise particular guidelines that you should follow if you will be using a rental income. They also have a strict ratio between debt and income for mortgages in the investment properties. The maximum ratio for debt oftentimes should not be greater than 45% of your income. Mortgages for investment properties do not authorize gift funds. They only permit a maximum seller authorization of 2% into the closing costs of buyers. Investment properties are required by the appraisals to have a rent comparison schedule. The lender will use the average of your rental income on the last two years of your tax return for the purpose of your mortgage qualifications. If you happen to have no experience in holding a rental property, you will have to qualify without using the rental income projection.


You should consider acquiring good financing arrangement first. It is to gain a financing investment that are profitable. Your investment can be profitable if the financing cost is less than your generated income. Even with the stricter standards of the lender on investment loans, it might be the excellent time in investing a rental property. You can contact Resourceful Capital Financial Corporation at 1-888-882-0786 to discuss how we can help.

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