Loans for rental properties?

[blahblahblah]

Does anyone have any idea what sort of loans are available for rent properties these days? I am starting to see some condo prices that would be cash flow positive even with moderate down payments. I would want to do minimum down. I’m guessing not much is available and you’d have to have at least 20%, but I thought I’d see if anyone knew the scoop. Thanks!

[(former)FormerSanDiegan]

You can get under 5%, 30-year fixed for a rental property, if you have at least 80% LTV. But there are many considerations. If you are buying a rental that is currently vacant, you may have a tough time (perhaps impossible) claiming the income on the property for qualificaiton purposes.

It will depend on your current debt load (do you own a primary residence and have a mortgage on it ?) and other factors.

Based on personal experience owning rentals for the past decade in San Diego, if you do not have enough for 20% down, plus have reserves equivalent to 6 months of mortgage payments (not for vacancies, but for repairs, maintenance, vacancies combined), you should not buy and hold a rental property. Just my opinion.

Hopefully HLS is out there and can offer a more informed response.

[(former)FormerSanDiegan]

You can get under 5%, 30-year fixed for a rental property, if you have at least 80% LTV. But there are many considerations. If you are buying a rental that is currently vacant, you may have a tough time (perhaps impossible) claiming the income on the property for qualificaiton purposes.

It will depend on your current debt load (do you own a primary residence and have a mortgage on it ?) and other factors.

Based on personal experience owning rentals for the past decade in San Diego, if you do not have enough for 20% down, plus have reserves equivalent to 6 months of mortgage payments (not for vacancies, but for repairs, maintenance, vacancies combined), you should not buy and hold a rental property. Just my opinion.

Hopefully HLS is out there and can offer a more informed response.

[(former)FormerSanDiegan]

You can get under 5%, 30-year fixed for a rental property, if you have at least 80% LTV. But there are many considerations. If you are buying a rental that is currently vacant, you may have a tough time (perhaps impossible) claiming the income on the property for qualificaiton purposes.

It will depend on your current debt load (do you own a primary residence and have a mortgage on it ?) and other factors.

Based on personal experience owning rentals for the past decade in San Diego, if you do not have enough for 20% down, plus have reserves equivalent to 6 months of mortgage payments (not for vacancies, but for repairs, maintenance, vacancies combined), you should not buy and hold a rental property. Just my opinion.

Hopefully HLS is out there and can offer a more informed response.

[(former)FormerSanDiegan]

You can get under 5%, 30-year fixed for a rental property, if you have at least 80% LTV. But there are many considerations. If you are buying a rental that is currently vacant, you may have a tough time (perhaps impossible) claiming the income on the property for qualificaiton purposes.

It will depend on your current debt load (do you own a primary residence and have a mortgage on it ?) and other factors.

Based on personal experience owning rentals for the past decade in San Diego, if you do not have enough for 20% down, plus have reserves equivalent to 6 months of mortgage payments (not for vacancies, but for repairs, maintenance, vacancies combined), you should not buy and hold a rental property. Just my opinion.

Hopefully HLS is out there and can offer a more informed response.

[(former)FormerSanDiegan]

You can get under 5%, 30-year fixed for a rental property, if you have at least 80% LTV. But there are many considerations. If you are buying a rental that is currently vacant, you may have a tough time (perhaps impossible) claiming the income on the property for qualificaiton purposes.

It will depend on your current debt load (do you own a primary residence and have a mortgage on it ?) and other factors.

Based on personal experience owning rentals for the past decade in San Diego, if you do not have enough for 20% down, plus have reserves equivalent to 6 months of mortgage payments (not for vacancies, but for repairs, maintenance, vacancies combined), you should not buy and hold a rental property. Just my opinion.

Hopefully HLS is out there and can offer a more informed response.

[Ren]

You’re probably aware of the front-end and back-end ratios the bank uses to decide if you qualify for a mortgage. With a rental, it’s exactly the same thing. More down makes for better ratios and easier qualifying. If you already own a property, the payment (including insurance, taxes, etc.) will be counted as a liability when qualifying for the second mortgage just like a 5-year car loan would.

From easiest to most difficult:

1) You don’t own anything and are trying to qualify for a rental property. To my knowledge, there is no lender who would accept less than 20% down on a property that you intend to rent, at least not at a remotely acceptable interest rate. I believe FHA loans require periodic verification of owner-occupancy (don’t quote me on that), so lying to get a low-down loan may not be workable.

2) You own a rental with a tenant, and want to buy a second property for yourself. Most lenders will count about 75% of the rent as income, offsetting the liability of the mortgage. However, many lenders won’t even consider counting any of the rent as income unless the property has been rented steady for a year.

3) You own a home and want to buy a rental property. This is the most difficult because the bank doesn’t count potential rent as income. You would need enough income to qualify for both mortgages and all the associated costs.

Every lender I talked to stated that 30% down was necessary for the second property, whether you had a tenant in an existing rental or not. That’s not to say a 20% loan isn’t available, I’m sure they’re out there, especially if you’re well-qualified and have a lot of equity in the first property. I just didn’t run into one.

[Ren]

You’re probably aware of the front-end and back-end ratios the bank uses to decide if you qualify for a mortgage. With a rental, it’s exactly the same thing. More down makes for better ratios and easier qualifying. If you already own a property, the payment (including insurance, taxes, etc.) will be counted as a liability when qualifying for the second mortgage just like a 5-year car loan would.

From easiest to most difficult:

1) You don’t own anything and are trying to qualify for a rental property. To my knowledge, there is no lender who would accept less than 20% down on a property that you intend to rent, at least not at a remotely acceptable interest rate. I believe FHA loans require periodic verification of owner-occupancy (don’t quote me on that), so lying to get a low-down loan may not be workable.

2) You own a rental with a tenant, and want to buy a second property for yourself. Most lenders will count about 75% of the rent as income, offsetting the liability of the mortgage. However, many lenders won’t even consider counting any of the rent as income unless the property has been rented steady for a year.

3) You own a home and want to buy a rental property. This is the most difficult because the bank doesn’t count potential rent as income. You would need enough income to qualify for both mortgages and all the associated costs.

Every lender I talked to stated that 30% down was necessary for the second property, whether you had a tenant in an existing rental or not. That’s not to say a 20% loan isn’t available, I’m sure they’re out there, especially if you’re well-qualified and have a lot of equity in the first property. I just didn’t run into one.

[Ren]

You’re probably aware of the front-end and back-end ratios the bank uses to decide if you qualify for a mortgage. With a rental, it’s exactly the same thing. More down makes for better ratios and easier qualifying. If you already own a property, the payment (including insurance, taxes, etc.) will be counted as a liability when qualifying for the second mortgage just like a 5-year car loan would.

From easiest to most difficult:

1) You don’t own anything and are trying to qualify for a rental property. To my knowledge, there is no lender who would accept less than 20% down on a property that you intend to rent, at least not at a remotely acceptable interest rate. I believe FHA loans require periodic verification of owner-occupancy (don’t quote me on that), so lying to get a low-down loan may not be workable.

2) You own a rental with a tenant, and want to buy a second property for yourself. Most lenders will count about 75% of the rent as income, offsetting the liability of the mortgage. However, many lenders won’t even consider counting any of the rent as income unless the property has been rented steady for a year.

3) You own a home and want to buy a rental property. This is the most difficult because the bank doesn’t count potential rent as income. You would need enough income to qualify for both mortgages and all the associated costs.

Every lender I talked to stated that 30% down was necessary for the second property, whether you had a tenant in an existing rental or not. That’s not to say a 20% loan isn’t available, I’m sure they’re out there, especially if you’re well-qualified and have a lot of equity in the first property. I just didn’t run into one.

[Ren]

You’re probably aware of the front-end and back-end ratios the bank uses to decide if you qualify for a mortgage. With a rental, it’s exactly the same thing. More down makes for better ratios and easier qualifying. If you already own a property, the payment (including insurance, taxes, etc.) will be counted as a liability when qualifying for the second mortgage just like a 5-year car loan would.

From easiest to most difficult:

1) You don’t own anything and are trying to qualify for a rental property. To my knowledge, there is no lender who would accept less than 20% down on a property that you intend to rent, at least not at a remotely acceptable interest rate. I believe FHA loans require periodic verification of owner-occupancy (don’t quote me on that), so lying to get a low-down loan may not be workable.

2) You own a rental with a tenant, and want to buy a second property for yourself. Most lenders will count about 75% of the rent as income, offsetting the liability of the mortgage. However, many lenders won’t even consider counting any of the rent as income unless the property has been rented steady for a year.

3) You own a home and want to buy a rental property. This is the most difficult because the bank doesn’t count potential rent as income. You would need enough income to qualify for both mortgages and all the associated costs.

Every lender I talked to stated that 30% down was necessary for the second property, whether you had a tenant in an existing rental or not. That’s not to say a 20% loan isn’t available, I’m sure they’re out there, especially if you’re well-qualified and have a lot of equity in the first property. I just didn’t run into one.

[Ren]

You’re probably aware of the front-end and back-end ratios the bank uses to decide if you qualify for a mortgage. With a rental, it’s exactly the same thing. More down makes for better ratios and easier qualifying. If you already own a property, the payment (including insurance, taxes, etc.) will be counted as a liability when qualifying for the second mortgage just like a 5-year car loan would.

From easiest to most difficult:

1) You don’t own anything and are trying to qualify for a rental property. To my knowledge, there is no lender who would accept less than 20% down on a property that you intend to rent, at least not at a remotely acceptable interest rate. I believe FHA loans require periodic verification of owner-occupancy (don’t quote me on that), so lying to get a low-down loan may not be workable.

2) You own a rental with a tenant, and want to buy a second property for yourself. Most lenders will count about 75% of the rent as income, offsetting the liability of the mortgage. However, many lenders won’t even consider counting any of the rent as income unless the property has been rented steady for a year.

3) You own a home and want to buy a rental property. This is the most difficult because the bank doesn’t count potential rent as income. You would need enough income to qualify for both mortgages and all the associated costs.

Every lender I talked to stated that 30% down was necessary for the second property, whether you had a tenant in an existing rental or not. That’s not to say a 20% loan isn’t available, I’m sure they’re out there, especially if you’re well-qualified and have a lot of equity in the first property. I just didn’t run into one.

[UCGal]

When I was looking for rental properties several months ago (so the data is stale) the rates got dramatically better at 25-30% down and higher.

There were loans for smaller downs – but they were a lot more expensive.

If you just want to get an idea of the difference in rates you can play around on aimloan.com. If you decide to pull the trigger – definitely shop rates.

[UCGal]

When I was looking for rental properties several months ago (so the data is stale) the rates got dramatically better at 25-30% down and higher.

There were loans for smaller downs – but they were a lot more expensive.

If you just want to get an idea of the difference in rates you can play around on aimloan.com. If you decide to pull the trigger – definitely shop rates.

[UCGal]

When I was looking for rental properties several months ago (so the data is stale) the rates got dramatically better at 25-30% down and higher.

There were loans for smaller downs – but they were a lot more expensive.

If you just want to get an idea of the difference in rates you can play around on aimloan.com. If you decide to pull the trigger – definitely shop rates.

[UCGal]

When I was looking for rental properties several months ago (so the data is stale) the rates got dramatically better at 25-30% down and higher.

There were loans for smaller downs – but they were a lot more expensive.

If you just want to get an idea of the difference in rates you can play around on aimloan.com. If you decide to pull the trigger – definitely shop rates.

[Author]

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