Investment property is real estate purchased with the intention of earning a return on the investment (ROI). This ROI could come as rental income, the resale of the property or sometimes both.
When securing a loan for a primary residence, a borrower typically has access to a wide variety of financing options, including FHA, VA, USDA and Conventional loans; however, it is often more challenging to secure financing for an investment property.
Insurers do not provide mortgage insurance to investment properties. Therefore, investors must have a substantial down payment to secure financing for their investment properties. Lenders typically insist on good credit scores, lower loan-to-value ratios (LTV), and ample savings to cover six months’ worth of reserves.
Investment loan guidelines are currently as follows:
MAXIMUM LOAN AMOUNT
MINIMUM DOWN PAYMENT
15 OR 30 YEARS
2% OF SALES PRICE
MINIMUM OF 6 MONTHS PITI
(PITI – Principal, Interest, Taxes and Insurance)
Borrower may not have more than four (4) financed properties, including principal residence. Having multiple properties may require borrower to furnish additional documentation.
Appraiser may be required to complete an operating income statement with the appraisal.
*Information as of 10/12/2018. All of the above information is subject to change or may have additional requirements*