How to Get a Mortgage for an Investment Property
Understanding how to get a mortgage for an investment property is an essential step of becoming a successful real estate investor. Especially in the greater Las Vegas area, there are numerous opportunities to make investments in property that is likely to appreciate in value while providing a good ROI through rental income. But getting financing on an investment property is often more difficult than obtaining a mortgage on your primary home. Here are some steps that can help you get the leverage financing necessary to purchase a rental property.
Have a substantial down payment
Having a substantial down payment not only signals that you’re serious and well-prepared for the venture of owning a rental property, but it increases the chances you’ll be approved for a loan. Mortgage insurance doesn’t cover investment properties, so typically buyers are required to have 20%. A down payment of 25% to 30% may result in a lower interest rate. One of lenders’ biggest fears is that it’s easier to walk away from a rental property than from your own home. The more you’ve invested into a property, the more you’re perceived as being committed.
Know your credit score
While the bank will take a closer look at your down payment and the property’s value to loan ratio, the most important factor in getting an approval is your own credit score. Do you have a high credit rating? If not or if you’re unsure, take the time to examine your credit report. Free copies of your report can be obtained online. Addressing problems such as accounts in collections, late payments, and inaccurate information can drive up your score. A higher score not only increases your chances of approval, but it reduces the interest rate you’ll have to pay.
Consider alternate funders
Large national banks have stringent guidelines with respect to investment property loans. But an experienced lender can connect you with alternate funders that may be more willing to work with you. For example, a neighborhood bank may have more flexibility with respect to your down payment and a private lender may be willing to take a risk on a lower credit score for a higher interest rate. Talk with an experienced lender about your unique situation and goals to explore what solution may be right for you.
Are you thinking about purchasing an investment property in Las Vegas? Contact Sydnee Johnson today to arrange for a personalized consultation to discuss your options for mortgages.