An investment property loan is typically found using an online mortgage provider, national banks, and investor-only lenders. The loan amounts for investment property will usually range between $45K and $2 million, and sometimes higher. The rental property loans will usually require you to pay a down payment of 20 percent. The buy and hold investors will usually use long-term investment loans for these properties.
If you are searching for an investment property loan, there are several lenders to consider, so it is highly recommended that you shop around to find the right lender for the needs you have.
The Different Types of Investment Property Loans
When discussing investment properties, it usually refers to residential properties that have under four units. A quality investment property loan in these situations is typically going to be a conforming mortgage. It is these loans that are going to provide you with the longest terms and the best rates, which make them affordable on a month to month basis.
You can apply for these conforming mortgages from most national banks, along with online mortgage providers, and lenders that are only willing to work with investors. These mortgages are usually going to have fixed rates and provide you with the longest terms of all investment property loans available.
The conforming mortgages won’t usually be applicable for fixer-uppers. If you are planning serious renovations on your property before rent it and if you qualify for permanent financing, then a rehab loan may be necessary. A conforming mortgage isn’t a good fit for your multifamily property, either, which are properties with over four units or for investors who want to rent or buy commercial real estate.
Comparing Loan Options for Investment Properties
There are three basic types of investment property lenders that a real estate investor can receive the conforming mortgage from. These include national banks, lenders for investment businesses, and an online mortgage lender. Each option offers pros and cons and you have to consider which one best suits your needs.
The Costs and Rates for Investment Property Loans
If you are borrowing funds as a single person, the rates and costs of a conforming mortgage will be similar from one lender to the next. It will begin to vary if you are borrowing as a business entity. In these situations, you will have to pay higher costs and rates because the risk is going to be higher for the lender.
Getting the Right Financing Option for Your Needs
When it comes to getting the right financing option for your needs for a rental property you are considering buying, be sure to consider the factors here. Using the services of a private lender may be a smart move as they may be willing to take on more risk than national banks and other lenders.
To learn more about loan options, check out the recently released Quarterly Competitive Survey, which provides information on some of the top loan programs that are currently available.