Requirements for Investment Property Loans

No two investors will have the same budget when the purchase of a property is being considered. It is common for someone to seek a partially financed dollar amount to buy an investment home in the U.S. Before borrowers can apply for a loan, it is helpful to understand common requirements for investment property loans. Each bank or lending institution has its own requirements although there are some common elements.

Two Types of Loans Available

There are generally two forms of loans that a borrower can apply to receive. These are identified as the following:

1. Commercial Loan

2. Residential Loan

The main different between these forms is how the property will be used in the future by the borrower. Commercial loans can have more strict credit requirements due to the larger amounts of capital supplied by a lender. A residential loan is common with first-time investors who plan to seek rental property loans to buy real estate in the U.S.

Standard Loan Requirements

Lenders and banks will usually require an application process that is used to determine the overall worthiness of a borrower. There are many pieces of information that must be supplied in order for a lender to review financial and debt information.

The traditional requirements that are needed to explore investment property loan rates can include:

1. Credit Scores

2. LTV

3. DTI

4. Employment History

5. Mailing Address

Lenders will often pre-qualify a person who meets minimum requirements for obtaining an investment property loan. A quick check of a credit rating can provide the bulk of information that lenders use to find out if borrowers are good candidates.

A person who searches the market to find loans can be presented with options that include investment property loans with no money down and those that will require a smaller down payment.

Alternatives to Bank Loans

There are alternatives to finance companies and mortgage lenders when it comes to buying an investment property. A person can easily seek hard or soft money lenders. A hard money lender is often a professional capital company that makes private loans to real estate investors. These companies are often interested in the total equity of the home and what type of profit is available after the home is rented.

How do investors find property loans? Getting a referral can be life saver. Good lenders are worth a lot in the real estate industry. Referrals can be made through friends, relatives or people who attend local real estate investing clubs. There are local banks and credit unions in some cities that specialize in underwriting real estate loans with varying interest rates.

The JWB company helps first-time investing clients to buy properties using non-traditional financing options that include self-directed IRA and 401K accounts. This can help curb the common criteria for an investment property loan through a third-party lender.

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If you’re ready to get started with JWB, schedule a strategy session with our property investing experts now!