Mortgage Products for Residential Real Estate Investors

Home prices have been on a steady climb from the depths of the housing crash, leaving many wondering if it is still a good time to invest in the residential real estate market.

According to the National Association of Realtors, or NAR, 85% of major metro areas saw gains in existing, single-family home prices in over the last 2 years, while only 14% saw a price decline.

Relatively low interest rates are attracting investment buyers, and limited inventory is behind escalating prices in some desirable areas. Nearly all forecasters are predicting continued steady growth in most of the country.

If you’re ready to seek out financing for your residential investment property, here are a few things to consider.

There are a wide variety of loan programs out there for the residential investor – so make sure you take the time to do your research.

For example, we have partners that offer a “no-income” loan – meaning that loan qualification is based only on the cash flow of the particular property. No tax returns, no stated income, and no debt-to-income calculations required! Reach out to me for more information.

Here are some key strategies for the real-estate investor….

Be a ‘strong borrower’

Although many factors — among them the loan-to-value ratio — can influence the terms of a loan on an investment property, investors should check their credit score before attempting a deal. It will have the greatest impact on a loan’s terms.

Credit scores in the 700s are best – but there are programs available for those with scores of 660 or better.

Have a down payment ready

For “no income” investment loans, you will need to put down 25%. For more conventional versions, 20% will suffice.

In addition, reserves in the bank to pay for all your expenses, personal and investment-related, for at least six months also have become part of the lending equation.

Shy away from big banks

Do you research prior to obtaining financing. Make sure to vet the lenders you are considering, and investors shouldn’t be afraid to inquire about their credentials, and then verify them.

Generally, mortgage lenders and brokers are good option because they have access to a wide range of loan products.

Larger banks can be more difficult to work with and more stringent on their borrower requirements.

Think outside the box

If you’re looking at a good property with a high chance of profit, consider planning for that down payment. You can find that renovation money through home equity lines of credit or even from some life insurance policies months before the transaction.

As always, research your investment thoroughly before turning to any riskier sources of cash.

Financing for the actual purchase of the property might be possible through private loans, as well.

Just be aware that you may be met with some skepticism, especially if you don’t have a long history of successful real estate investments. Some peer-to-peer groups also require your credit history to meet certain criteria.