What Every Real Estate Investor Should Know About Investment Property Loans
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 income2. 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 lender’s 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 allowedCheck with your loan officer up front if you have any of these issues6. 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.
Stephanie Graham is a mortgage professional with more than two decades of experience in both retail and wholesale lending. Stephanie has excelled in a number of positions including CRA officer, corporate trainer, consultant, and as an executive of Complete Mortgage Processing. More tips and techniques for mortgage processing and origination can be found at
http://www.completemortgageprocessing.comStephanie Graham
