What Is an Investment Property Loan?
An investment property loan will help you purchase a second home that you can then use to rent out or flip for profit.
Often, investment property loans are set up as fixed-rate mortgages that typically have a higher barrier of entry and have higher interest rates. Conventional lenders generally charge a quarter to one-half percent more interest on a loan for a rental home than if the same home were used as the primary address for the borrower. Of all kinds of residential rental properties, the single-family home offers the lowest interest rate.
A non-owner-occupied conventional loan for an investment property of 75% of the lower of appraised value or the purchase price is the most often available loan from the majority of lending institutions, but Fannie Mae and Freddie Mac will make financing available up to the 80% loan-to-value level.
Griffin Funding offers investment property loans for those interested in buying or refinancing rental properties and second homes, whether it is a:
- Single-family home
- Planned unit development (PUD)
- Multi-family, 1-4 unit dwelling
Griffin Funding strives to provide borrowers with more accessible mortgage loans by offering flexible terms and competitive interest rates.
How to Get a Loan for an Investment Property
Because they aren’t for a primary residence, getting an loan for an investment property usually requires a better financial profile than a loan for a primary residence.
Based on the lender you apply with; the terms of your loan will vary. Make sure that you are ready to expand into investment property by establishing financial stability so that you can secure the most favorable loan terms. How much you pay as a down payment, how good your credit is, the rental income, and the value of the property that you intend to buy are all factors in the terms of your investment property loan.
A mortgage lender like Griffin Funding can help you determine whether you qualify for a mortgage based on their own investment property loan requirements and provide you with a quote for loan terms, which you can then accept or keep looking.
To find out if you qualify for a Griffin Funding investment property loan, submit an application online or speak with one of our loan specialists today. Our 10-step loan approval process is streamlined to make it as stress-free and efficient as possible. The most important thing you can do is ensure that you’re able to provide all the documentation we need—like proof of income—with a quick turnaround.
Together, we can help you secure an investment property loan that helps you purchase or refinance a second home.
What is the Minimum Down Payment for an Investment Property Loan?
Since mortgage insurance is not available for investment properties, investment purchase loans usually require a minimum 20% down payment. How much cash that translates into depends on the value of the property you’re trying to buy.
Note that if your current home has enough equity, you may be able to use it to buy additional property.
Can You Use a VA Loan for an Investment Property?
VA loans can be used for some investment properties. A VA loan can only be used for homes up to a maximum of four units and you must occupy one of the units. You can’t use your loan towards anything classified as anything but real estate, so a mobile home, RV or houseboat do not qualify.
You also must live on site. If you purchase a muti-unit property you have the option of renting out the unused units for rental income. However, using those rentals as short-term rentals is not allowed. So, Airbnb’s, bed-and-breakfasts, or other rental agreements 30 days or less are prohibited.
Can You Get an FHA Loan for an Investment Property?
Just like with VA loans, FHA loans are intended for buyers of a primary residence. The borrower must live in the home for the majority of the year. After one year of ownership, you may be able to move out and rent the home if you need to move or the house becomes too small. After that point the owner may rent out the home.
Also like a VA loan, an FHA loan can be applied to a property with up to four units. As long as you live in one of them, the other three can be rented out.
Advantages of Getting an Investment Property Loan Through Griffin Funding
Owning an investment property lets your money work for you. It provides extra income, diversifies your portfolio, increases your net worth, and provides extra insurance against shocks in the market.
Griffin funding is a leading mortgage lender and broker. When you work with us, you get assistance personalized to you from extremely knowledgeable specialists who will secure you a loan at a competitive rate. We make sure that we are transparent the whole way through the process to provide you with excellent customer service.
Other Loan Options for Investors
We also offer alternative lending for experienced and inexperienced real estate investors based on the debt service coverage ratio (DSCR) of the property. Investors can put as little as 20% down and qualify off of the cash flow of the investment property. Get more information on our DSCR loans if you think that might be a better fit for you.
A DSCR loan is type of no-income loan, allowing you to qualify based on your property’s cash flow and not your income. It is an easy way to expand your real estate holdings because it allows us to determine your ability make payments without needing your income. With a good debt service coverage ratio—which is the ratio of a borrower’s annual gross rental income and annual debt—you can qualify for low interest rates and lower necessary cash reserves.
Find Out If You Qualify for an Investment Property Loan
If you feel like it is time to take the next step and increase your holdings, it may be time to see if you qualify for an investment property loan. Griffin Funding is a trusted, leading lender, with a professional, customer-focused staff based out of San Diego and currently serving 15 states throughout the country. We provide white-glove 5-star service, work quickly and efficiently, and pride ourselves on closing most of our purchase loans in 30 days or less.
We can find the right loan for you whether it’s a mortgage loan for an property investment, or a VA, FHA, or jumbo loan. Request a quote today so we can get started.