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Securing a great mortgage deal for an investment property is a daunting task. Before you step down the Key Highlights to Securing Rental Property Business Loans
- Learn About the Limits of Lending.
- Find an Investor-Friendly Lender.
- Know Requirements for Credit Scores.
- Learn About Cash Reserves.
- Know How Down Payments Impact Your Loan.
- W2 Income and No Ratio DSCR Loans
If you are considering buying a rental property, make sure you keep in mind a few important factors that include:
Lending Limits
According to Fannie Mae, an investor is allowed to take only up to 10 loans once. So, working with the right lender should be your priority as he will help you make the best out of your 10-loan limit. It's worth noting that bigger banks or financing institutions will allow only up to four business loans for rental property. Do extensive research to reach a lender that can support the 10-loan limit.
Investor-Friendly Lender
Buying a rental home is a long-term investment and your lender is a BIG part of the entire scenario. Make sure you team up with a strong and reliable lender who understands the real estate landscape. Work with a direct lender if you are planning to build a strong portfolio of rental properties. The one primary difference between a broker and a lender is that a broker will shop around to get you the best deal, whereas a lender is an institution from where you will get the loan. Don't hesitate to ask your prospective lender about his current active investors and how many business loans for rental property can he offer and more.
Credit Requirements
Since there is a 10-loan limit, there are different credit qualification guidelines. For properties 1-4, your credit score should be around 630 and for properties 5-10 at least a 660 credit score is required.
Cash Reserves
Besides the down payment, make sure you have enough cash reserves that can match at least six months of mortgage payments of your business loans for rental property. Once you know the cost estimate of the rental, get a monthly payment estimate from your lender so that you can manage your expenditures and savings accordingly.
Down Payment
Just like there are two sets of credit score guidelines, for down payments you need to follow different guidelines. If you acquire business loans for rental property 1-4 for single-family you are liable to pay 20% as a down payment, for loans 5-10, it would be 25% and for loans 1-10 for multi-family, you need to pay 25% to 30% of the total cost of the property.
W2 Income
In order to be eligible for a mortgage deal, you need to provide your lenders with a minimum of two years of w-2 income. It is required to calculate your annual income. If you are self-employed, you need to show your tax returns for the past two years and a letter from a CPA confirming your previous tax returns. Business loans for a rental property are quite complex when it comes to taxation but certain deductions can be planned better.
Rental property is an ideal way to build your wealth. Make sure you plan the strategies ahead of time for smooth and hassle-free proceedings. Call us today for a free consultation.
No ratio DSCR loans are now available that do NOT require W2 information and can be based solely upon the potential income of the property