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How to Get a Mortgage for a Rental Property
Ready to talk to an expert?
Looking for rental property mortgage rates near you? If so, First Bank can provide you with tips and tricks on how to get a rental property mortgage, as well as how to find the best mortgage rates near you.
Rental Property Tips: How to Get a Mortgage
According to Money Under 30:
“Getting a mortgage for an investment property can be headache. Your best bet is to be prepared before you even start down that path. Make sure you have enough cash reserves to make your lender happy, as well an impressive credit score.”
How Can You Prepare?
- Know the lending limits — For example, Fannie Mae currently allows each investor to carry 10 loans at once.
- Look for investor-friendly lenders — Having a good relationship with your lender could be the key to success.
- Know your credit requirements — There are two different credit-qualification guidelines for getting rental property loans.
- Prepare your cash reserves — Lenders typically require you to have six months of cash reserves available per property.
- Be prepared to make a down payment — There are sets of guidelines regarding rental properties that you must follow when making a down payments.
- Show your W-2 income — Lenders typically require that you show a minimum of two solid years of W-2 income.
Traditional Mortgage vs. Rental Property Mortgage
If you are looking for a rental property mortgage, expect to find rates that are slightly higher than primary residence mortgages. Lenders are trusting that you will be able to rent the property to tenants and that they will be able to make their payments on time to you.
Don’t be surprised to see mortgage rates for rental properties fluctuate more than primary residence mortgage rates from one lender to the next. Some lenders are more trusting in rental properties than others and may want to see that you have enough money to pay for both your primary residence mortgage and the rental property mortgage at the same time. This is a safety net for the bank in case your rental property fails to attract any renters or those renters fail to pay the rent.
Mortgage rates can vary from one lender to the next but there are also some key differences in the mortgage itself when compared to that of a traditional mortgage.
- Lenders may wish to see a substantial amount of cash reserves that can cover the cost of the rental property mortgage for a certain number of months.
- Down payment requirements will also be slightly higher for rental property mortgages. Because lenders are taking on additional risk with a rental property mortgage, they will often want you to put more of your own equity into the loan and it’s not uncommon to see minimum down payments over 25%.
- While a primary residence mortgage allows you to purchase private mortgage insurance, this kind of insurance is not available for rental mortgages.
First Bank offers investment property mortgages and has a team of mortgage experts on hand for free consultation. Get more information about rental property mortgage rates near you, and learn why First Bank is the ideal option for your next purchase.
Loans subject to credit approval.
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Source:
Money Under 30: http://www.moneyunder30.com/get-mortgage-for-rental-property
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