Purchasing your first rental property is a big step in your real estate investor journey. Aside from choosing a potentially profitable property, you need to figure out how to finance your rental.
Before sharing how to apply for an investment loan, et’s look at how a primary home mortgage differs from a rental property mortgage.
On the surface, a mortgage for a rental may look similar to a mortgage for a primary home since the application process is the same. However, there are different rules and guidelines lenders follow when you apply for a mortgage on a rental property.
For a primary home, you can make as little as a 3% down payment in some cases while for investment properties the minimum down payment required can range from 15% to 20%.
Since lenders are taking on higher risk, your mortgage rate on your rental property will likely be a little higher. Usually, the rate will be between 0.375 to 0.5 of a percentage point higher for an investment property compared to a primary home loan.
In some instances, you may have to settle for a shorter term compared to the typical 30-year term offered for primary home mortgages.
The application process for a rental property involves the same steps as a primary home loan. Lenders will qualify the buyer, appraise the property, research the title and underwrite the loan.
When financing a rental property lenders will require a minimum credit score of 620. If you want to get the best rates your scores should be in the high 740s or better. DTI ratio should be no higher than 35% to 45%.
The lender may ask for financial statements for the past 3 years as well as projections for the next 12 months, similar to the requirements for a commercial borrower. Additionally, you’ll also need to submit current personal financial statements and tax returns of principal owners.
Being a landlord has its perks but it’s important that you have all the information necessary for success. Get in touch with our loan advisors for personalized guidance and to get pre-approved on your loan today.
We've been helping customers afford the home of their dreams for many years and we love what we do.
Company NMLS: 990796
416 Myrtle Street
Santa Ana, CA 92701
Our Website strives to ensure that its services are accessible to people with disabilities. Our Website has invested a significant amount of resources to help ensure that its website is made easier to use and more accessible for people with disabilities, with the strong belief that every person has the right to live with dignity, equality, comfort and independence.
Our Website makes available the UserWay Website Accessibility Widget that is powered by a dedicated accessibility server. The software allows mygrfinancial.com to improve its compliance with the Web Content Accessibility Guidelines (WCAG 2.1).
Our Website accessibility menu can be enabled by clicking the accessibility menu icon that appears on the corner on the page. After triggering the accessibility menu, please wait a moment for the accessibility menu to load in its entirety.
Our Website continues its efforts to constantly improve the accessibility of its site and services in the belief that it is our collective moral obligation to allow seamless, accessible and unhindered use also for those of us with disabilities.
Despite our efforts to make all pages and content on Our Website website fully accessible, some content may not have yet been fully adapted to the strictest accessibility standards. This may be a result of not having found or identified the most appropriate technological solution.
If you are experiencing difficulty with any content on Our Website website or require assistance with any part of our site, please contact us during normal business hours as detailed below and we will be happy to assist.
If you wish to report an accessibility issue, have any questions or need assistance, please contact us by sending an email to: email@example.com