If you’re thinking of purchasing an investment property, you’re in good company – investors bought a record share of homes last year. So what can you buy? Let’s take a look at the property types and the best financing for them.
Eligible Properties and Guidelines to Know
You have lots of choices when searching for a rental property. These include conventional stick-built properties, also called site-built homes, which employ the most traditional means of construction, building everything on site, or “stick by stick.” Modular homes, constructed mostly off-site and brought to a location, are also eligible. As are condominiums, townhomes, and other properties that meet the guidelines of Fannie Mae, Freddie Mac, or other Luxury Mortgage investors. A key point, these are all for properties with one to four units. What if you find a property with five or more units? Then you are likely looking for a commercial loan.
How these different guidelines apply to loan approval varies by individual case, but as an example, Fannie Mae allows investment properties to be located on individual lots, in condo, co-op, and subdivision projects, as well as in planned unit developments (PUDs). Fannie Mae doesn’t allow condos in co-op hotels, or financing for bed and breakfasts, boarding houses, timeshares, or houseboats (as the property has to be secured by real estate). Fannie Mae also stipulates that the property needs to be accessible by roads that are up to local standards, and suitable for year-round occupancy.
What’s the best way to finance an investment property?
There’s one mortgage product that was specifically designed for real estate investors: Investor Cash Flow. With the Simple Access® Non-QM Investor Cash Flow loan, approval is based on the rental income that a potential property will generate, rather than the borrower’s personal financial factors such as debt-to-income (DTI) ratio or employment record. Instead, loan qualification for amounts up to $3.5MM relies on the subject property’s debt-service coverage ratio (DSCR). And not just for one investment – financing for multiple properties is allowed.
Are there other mortgage products for investment properties?
Absolutely. We offer a number of options for those looking to purchase investment properties. These include Bank Statement loans, which consider bank deposits over things such as employment records and tax returns, Asset Qualifier loans that consider the borrower’s liquid assets, 1099 Only loans that look at year-end tax documentation, and more.
If you’re ready to expand your real estate portfolio, Luxury Mortgage is ready with investor friendly financing options. Contact one of our expert loan originators today.
Call us today: (888) 379-0303
Four Landmark Sq. Suite 300
Stamford, CT 06901