Savvy real estate investors know that there is an art to getting an investment property loan. Educating yourself on the process will eliminate much of the headache and hassles that often plague real estate investors. If you go into it expecting the same ease as financing a primary residence, you may find yourself feeling overwhelmed or frustrated. Here are a few things you should know: 1. Be prepared. Standard, fully documented investment property loans require a lot of paperwork. You may be required to provide the following documentation: Tax returns with all schedules
Schedule of real estate owned
Mortgage statements for each property
Tax and insurance documentation for each property
Proof of current or proposed rental income 2. There are a variety of loan programs available for investors. Research your options to find something that suits your cash flow needs and your credit profile. There are programs for both perfect and bruised credit. 3. Investment property loans often have more stringent underwriting criteria. A high FICO score may be required to get the terms you desire. The maximum loan allowed may also be less than that of a primary residence. There could be a limit on the number of real estate loans the borrower is allowed to have. Find out the lenders criteria in advance. 4. Appraisal fees are usually higher. The lender may require a market rent analysis to determine if your proposed rental income projections are realistic. 5. The lender may have other requirements or restrictions regarding the subject property such as: It must meet or exceed the minimum allowed square footage
Manufactured homes may or may not be allowed
Less than double-wide mobile homes may or may not be allowed
An appraisal subject to repairs may not be allowed Check with your loan officer up front if you have any of these issues 6. Consider reduced documentation loans to make the process easier. A slightly higher interest rate or a lower loan amount might not be a bad trade off if it gets the job done. |
