Real estate investing can be a fantastic way to generate wealth and returns, but only if you choose wisely when it comes to buying or mortgaging an investment property. There are various types of investment property mortgages in Abbotsford that come with their own advantages and disadvantages and are tailored for different investors.
Mortgages used to buy a property that generates income are known as investment property mortgages. This includes homes you want to rent out or homes you wish to renovate and then sell for a profit, also known as house flipping.
Minimum Eligibility Standards for Investment Property Mortgage
- Down payment: If you want to reside in one of the apartments, you can buy a multifamily property with just a 3.5% down payment. However, most lenders want at least 20% down payment, even though standard guidelines allow down payments as low as 15% for rental homes.
- Cash reserves: The money the lender wants you to have in the bank is more generally referred to as “mortgage or cash reserves.” Depending on the lending program, it often amounts to one to six months’ worth of mortgage payments.
- Revenue: You must demonstrate that you earn enough money to cover your monthly mortgage payments, just like you would with any other loan. Your debt-to-income (DTI) ratio is normally capped at 45% by traditional lenders.
- Credit Score : A traditional mortgage will require a minimum credit score of 620, but if you are unable to make a 25% down payment, the requirement is slightly higher with a credit score of 700.
How to Get an Investment Property Loan?
There are a few more steps in the mortgage procedure for obtaining an investment loan.
- Look around for a lender: Search for a lender that offers mortgages for investment properties. Although most lenders provide some kind of loan option for investment properties, rates can differ greatly.
- Fill out a loan application: The application process is the same as for any other loan type if you’re applying for a conventional, FHA, or VA loan.
- Provide additional asset paperwork: Bank statements and current leases or rental information for the property you’re buying can be required. Keep a current statement available because most lenders allow you to apply a portion of your retirement to your reserve requirement.
- Cover the cost of an appraisal: An additional report outlining the average rent received on comparable properties in the neighborhood is necessary for the home assessment procedure.
- Examine your final disclosure: Three business days prior to closing, the lender will provide a closing disclosure. Make sure that the numbers match your expectations by going over it again.
Mortgage Rates for Investment Properties
An investment property’s rates are typically 0.25 to 0.75 percentage points higher than those of a principal residence. The rate you are given is also significantly influenced by your down payment and credit score.
If you are planning to buy an investment property and looking for reliable investment property mortgage brokers in Abbotsford, Sandhu & Sran Mortgages is here for you. For the past many years, we have helped hundreds of investors in boosting their portfolio by providing funds for buying new investment properties. For more details about our mortgage services, contact us today.