Are you thinking about purchasing your own property with the intention of either renting it out or selling it? Investing in a property can be an excellent source of additional income, and investment property loans can help a borrower finance the purchase of a home for the purpose of renovating it, then renting it out or reselling it. If you are located in Jacksonville, Florida, and interested in learning more about financing an investment property, North Star Mortgage Network, Inc. can help. Read on to learn more about how to finance a home with investment property loans.
How Do Investment Property Loans Work?
Investment property loans, sometimes referred to as investor loans, help a buyer to purchase an investment property to either rent out or fix and flip a house, condo, or apartment building for supplemental income. It is important to note that a borrower is not allowed to live in the investment property as their primary residence unless the property has multiple units. Investment property loans are typically short term, with the property itself serving as collateral, and the loan can be used to help finance the property itself, as well as for maintenance and renovations. Investment property loans can offer several benefits for a buyer. In addition to funding the initial purchase of a home, you may also be eligible for tax benefits when you own an investment property. There are many different types of investment property loans, including hard money loans, certain types of conventional mortgages, and fix and flip loans. You will want to discuss the most suitable options with your mortgage lender.
Qualifying for an Investment Property Loan
Investment property loans do pose a higher level of risk for lenders, therefore they typically have higher interest rates and stricter lending requirements. Some common requirements for obtaining an investment property loan include:
- A good credit score – A credit score of at least 720 is required for an investor loan, and the higher your higher your credit score is, the more flexible a lender can be regarding your down payment, loan terms, and interest rates.
- Income verification – You will be required to prove that you have a consistent source of income and you will need to provide pay stubs and tax documentation.
- Cash reserves – lenders will want to see at least six months worth of savings to ensure that a borrower can to upkeep the property.
- A down payment – investment property loans will typically require a 15% to 20% down payment.
- Debt-to-income (DTI) – Your DTI must be lower than 50% to ensure that you can afford to cover monthly mortgage payments.
Get Help Applying for an Investment Property Loan
Investing in a property that can be renovated and resold or rented out can be an excellent way to make some extra cash. If you are located in Jacksonville, Florida, and interested in learning more about investment property loans, contact North Star Mortgage Network, Inc. today for a consultation.