Finding Investment Property Mortgages

Best Ideas to Get a Rental Property Mortgage

Finding investment property mortgages in todays economic climate can be challenging. No doc loans are out and larger down payments are required than in the early part of the 2000's when "liars loans" and "interest only" loans were common and you could flip real estate quickly.

Typically if you are using financial institutions for an investment property mortgage you are going to face certain limits. Most real estate loans are underwritten by Freddie Mac or Fannie Mae and so you need to follow their requirements. These include:

• A credit score of 680 or higher (only 620 would be needed if you are living in the house)


• a one to four unit residential property


• down payments in the range of 20-30%


• a limit of ten properties


• maximum debt to income ratio of 0.45

There are two lines of thought regarding investment property mortgages. If you can develop a relationship with a small bank it is often easier to get investment property loans. In the past I used mortgage brokers who dealt with national large banks that were throwing money around. However, most of these banks got burned and now have very strict underwriting procedures in place. A small bank that holds its notes will sometimes be willing to provide more then 10 real estate loans.

When you apply for an investment property mortgage expect to pay at least 1-2% higher interest rate for a non-owner occupied property loan. One way to get around this is to buy a new personal residence for yourself and convert your home to a rental property. This "boot-strap" method of investing in rental property is one of the best. Not only do you get owner occupied interest rates on both properties, you can also borrow the down payment from your 401k and use a 10 year amortization of the 401k loan .

Concerning down payments for your rental property, you must make sure that any funds that you borrow for the down payment are in your account two to three months before you apply for a mortgage.

Another consideration to take into account if you are using rental income as a source of income to qualify for a mortgage is that banks will only consider 75% of the rent towards your income. Banks also want to see at least a 2 year history of owning and managing rental property. In addition, they often want to make sure that you have adequate capital reserves in case something happens.

If you are sure you want to use bank financing for a rental property mortgage try finding a lender through HomePath.

If you are unable to find conventional mortgages for investment properties, don't give up hope. There are many paths to financing investment properties :

• Use seller financing


• Use hard money loans


• Use a lease-option sandwich

Here's a video explaining the process of getting a rental property mortgage and how you might get more then 10 mortgages:

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