1st Advantage Mortgage is a licensed mortgage broker and lender in Charlotte, NC. As a mortgage lender and broker, we compare investment-property pricing and rental-property guidelines across specialist wholesale lenders, so you can review options that fit your file.
Contents
- What Is an Investment Property Loan?
- Investment Property Loan Eligibility
- Types of Investment Property Loans Offered
- Estimating Cash Flow for Investment Property Loans
- Pros & Cons of Investment Property Loans for Homeowners
- Work With 1st Advantage Mortgage to Secure a Loan On An Investment Property
- Apply For An Investment Home Loan With 1st Advantage Mortgage Today
- Investment Home Loan FAQs
What Is an Investment Property Loan?
An investment property loan can help you purchase an income-generating property. You might intend to rent this property or flip it for a profit. Either way, investment property loans can be used to finance many different types of residences, including:
- Condos
- Apartments
- Manufactured homes
- Single-family homes
- Duplexes and quadplexes
Unfortunately, investment property loans command a higher interest rate. Why? Because when the economy nosedives, borrowers are more likely to default on their rental unit or fixer-upper than their primary residence. To compensate for that risk, lenders jack up the interest rates.
Investment Property Loan Eligibility
Higher risk also contributes to stricter lending requirements. Though these expectations vary from lender to lender, an investment property borrower in North Carolina, South Carolina, Texas, Florida, Virginia and Pennsylvania must generally have:
- A down payment of at least 15% to 20% for single-family homes. If you're trying to purchase a multifamily home, expect to fork out 25% or more.
- A credit score that meets the lender's guidelines. Credit profile is one factor lenders consider when reviewing pricing.
- A debt-to-income ratio of 36% or less. This metric is calculated by dividing your monthly debt expenses by your pre-tax income.
- Sufficient cash reserves to pay the mortgage for up to six months.
Types of Investment Property Loans Offered
Investment property loans are like burgers – they come in all different shapes and sizes with an assortment of accouterments. And though deciding between financing options is a bit harder than deciding between brie or provolone, 1st Advantage Mortgage is here to help investors across NC, SC, TX, FL, VA and PA find a mortgage loan that suits their tastes.
Not sure if you qualify? Contact us today to talk with one of our friendly Mortgage Expert.
Take a look at the investment property loans we offer, then get in touch. When you reach out, we’ll connect you with a Mortgage Expert who can walk you through each step of the lending process.
- Conventional Loan: The traditional lending option with relatively low interest rates and low down payment options.
- VA Multifamily Loan: A no-money-down loan available to eligible veterans⁵.
- Portfolio Loan: A private lending option that bundles several single or multifamily mortgages together.
- Blanket Loan: Designed for investors interested in financing several properties using one single loan.
- Hard Money Loan: Perfect for investors looking to renovate a property and then sell it for a profit.
Estimating Cash Flow for Investment Property Loans
When you apply for an investment property loan for a rental property, the lender may also expect to see a cash flow forecast. Cash forecasting is a way of calculating your anticipated income and expenses.
Your gross cash flow includes all the money generated by your rental property. It also accounts for vacancies. Assuming a 6% vacancy rate for a property that generates $20,000 per year, for example, you would lose $1,200 per year ($20,000 x .06 = $1,200). With that being said, you can expect your gross cash flow to be $18,800.
Your cash flow forecast would also consider gross operating expenses, such as:
- Insurance
- Property taxes
- Capital expenditures
- Maintenance costs
- Leasing fees
- Property management fees
Pros & Cons of Investment Property Loans for Homeowners
Let’s start with the positives. An investment property loan is a convenient financing tool that allows a savvy borrower to catalyze their net worth. Unlike stocks, which are fairly volatile, a two-bedroom cottage is a tangible investment that appreciates over time. That quaint home can also offer passive rental income or, with some sweat-equity, be flipped to generate a large lump sum.
But investment property loans aren’t all sunshine and shiplap. These lending instruments are hard to come by. Without a superb credit score, big down payment, and low debt-to-income ratio, a lender may not give you the time of day. If you do get approved⁷, pricing can differ from a primary-residence mortgage based on the lender, property, and borrower scenario.
Work With 1st Advantage Mortgage to Secure a Loan On An Investment Property
Are you feeling a little overwhelmed? We get it. Diving headfirst into an investment property loan can be unnerving, especially if you’re juggling other mortgages. You may worry that you won’t qualify or, if you do, that you won’t secure favorable terms. While these are valid concerns, we’ve got your back.
If you couldn’t already tell, we do things differently at 1st Advantage Mortgage. For starters, we’ve replaced faceless loan processors with clear communication. That means you’ll get support throughout the process. Plus, our Mortgage Experts aren’t stuffy loan officers who wear ties and speak legalese – they’re real people who’ll walk you through the complicated intricacies of mortgage lending.
Apply For An Investment Home Loan With 1st Advantage Mortgage Today
Do you have some burning questions about investment property loans in North Carolina, South Carolina, Texas, Florida, Virginia and Pennsylvania? Speak with one of our friendly Mortgage Experts. They’ll take the time to discuss every step of the lending process.
Ready to get started? Sweet! Click “Apply Now” below to start your application.