Investment Property Loans
An investment property loan is a type of commercial loan that people can take out to buy an investment property. This type of mortgage is designed for those who want to buy the property and rent it for income or fix & flip it for profit.
Investing in real estate can be quite tricky and it’s wise to do your homework and assess both the benefits and the risks involved. If you have been thinking about taking out investment property loans, there are a few things you should know:
How do Investment Loans Work?
Investment property loans are used by individuals or corporations for the purchase of rent to own, mixed-use, multi family, construction, cash out of existing properties, and vacation rental properties.The investment property acts as collateral in an investment property loan. The lender will finance the purchase of the property, the rehabilitation of the property, or both. The loan amount is based on the lender's loan-to-value requirements and appraisal.
Investment property loansare available in several forms, and there are specific criteria that borrowers need to be able to meet. Choosing the wrong kind of loan can impact the success of your investment, so borrowers needto understand the requirements of each kind of loan and how the various alternatives work before approaching a lender.
Why Should You Choose Property Investment Loans?
Investing in a property can have multiple perks. While most people look at rental investments initially for the passive income, there are also the benefits of owning one in the long-term. In addition to monthly cash flow, there are also many tax benefits for the owners as well such as depreciation and a lower tax-rate for long-term profits.
Is It Hard to Get a Loan for an Investment Property?
Qualifying for an investment property loan is more challenging because lenders view investment properties as a greater risk. Lenders will want to make sure that you earn enough to afford monthly mortgage payments.
Compared to loans for your residence where you may qualify for a 0% or 3% down payment program, lenders want to see a larger down payment on investment properties, often between 20% and 35%.
Eligibilityfor an Investment Property Loan
While conventional loans are structured to make the loan experience simple for the borrower, investment property loans require strong financial standing and healthy cash reserves.A down payment is a must for an investment property loan. If you’re already in the property management game, you might know that rental income can help you qualify, based upon the current rental market value.
Here are a few criteria you would need to meet for an investment property loan:
- Good Credit:The minimum credit score for investment property loans should be in a good or an excellent score range.However, depending on the loan type and terms, it may differ for your unique situation.
- Cash Reverse:At a minimum, it is best to have six months of cash reserves on hand, in addition to closing costs. However, there might be different requirements based on your unique situation - number of properties, aggregate unpaid balance, etc.
- Down Payment:The minimum down payment required for an investment property loan is about 20%.
- Debt-to-Income: Debt-to-income or DTI is the percentage of your income paid out to debts that should be no more than 50%.
- Proof of Income:Most lenders will require proof of income. This generally means providing pay stubs and W2s, while self-employed borrowers may also be required to provide two years of tax returns.
- Most lenders will require some sort of investment property experience especially for flip & fix type loans.
Why Should YouTake Out an Investment Property Loan with LendingCapital?
We provide direct capital loans in the US market for certain types of properties in addition we partnered with many top lenders and banksto help ensure we meet all the demands of our real estate clients.
- Our application is simple online 24/7 with response back within 24 hours or less.
- We can close in as little as 3 weeks.
- We can provide SBA real estate loans with our approved SBA partners.
- We order all appraisals.
- All electronic signatures and verifications (you do not have to leave your home)
- We do all the work finding the correct lender, without initially affecting your credit.