- Research the Rental Property Loan Options
- Find Lenders that Offer Rental Property Loans
- Apply for a Rental Property Loan
You’ve decided you want to invest in rental property, but now you need to obtain financing. Here’s a guide on how to get a rental property loan.
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Research the Rental Property Loan Options
The terms for a rental property loan can range from 5 to 30 years, with the most common being 15 or 30 years. The shorter the loan period, the higher the monthly payments will be but the lower the overall interest payments will be. The loan amount that you can qualify for is also based on the value of the property, your credit score, and your income.
Research the types of rental property loans
There are several different types of loans you can use to finance a rental property. The most popular option is a traditional mortgage, but you can also get an FHA loan, a VA loan or a private loan from a lender.
Mortgage: A mortgage is the most common type of loan used to finance a rental property. You can get a fixed-rate mortgage with a 15-year or 30-year term. The interest rate will be higher if you have a shorter term.
FHA Loan: An FHA loan is a government-backed loan that can be used to finance a primary residence or investment property. The interest rates are typically lower than with a conventional mortgage, but you will need to pay for mortgage insurance.
VA Loan: A VA loan is a government-backed loan that can be used by veterans to finance an investment property. The interest rates are typically lower than with a conventional mortgage, but you may need to pay for mortgage insurance.
Private Loan: A private loan is any type of loan that is not backed by the government. Private loans can be used to finance both primary residences and investment properties, but the interest rates will be higher than with government-backed loans.
Determine the best loan type for your needs
There are three types of loans you can use to finance a rental property: a conventional mortgage, an FHA loan, or a portfolio loan.
Conventional mortgages are the most popular type of rental property loan. They’re available to anyone who meets the income and credit requirements, and they can be used to finance both single-family homes and multifamily properties.
FHA loans are government-backed loans that are available to low- and moderate-income borrowers with good credit. FHA loans can be used to finance single-family homes, manufactured homes, and duplexes.
Portfolio loans are private loans that are offered by some lenders. They’re typically used by investors who own multiple properties or who want to finance properties that don’t meet the guidelines for conventional or FHA financing.
Find Lenders that Offer Rental Property Loans
You’ll need to do some research to find lenders that offer loans for investment or rental properties. Once you’ve found a few potential lenders, you’ll need to compare the interest rates, loan terms, and other factors to make sure you’re getting the best deal.
Before you start visiting potential rental properties, it’s a good idea to spend some time researching financing options. There are several types of lenders that offer loans for investment properties, including banks, credit unions, and private lenders.
Each type of lender has different eligibility requirements and loan terms, so it’s important to compare your options before you decide on a lender. You can use an online lending marketplace like Credible to compare rates and terms from multiple lenders in just a few minutes.
Once you’ve chosen a lender, you’ll need to complete a loan application and provide documentation of your income, assets, and debts. The lender will also order a property appraisal to determine the value of the property you intend to purchase.
If you’re approved for the loan, you’ll need to pay closing costs, which can range from 2% to 5% of the loan amount. Once the loan is closed, you’ll make regular mortgage payments until it’s paid off.
Ask family and friends for recommendations
When you’re looking for a rental property loan, it’s a good idea to start by asking people you know for their recommendations. Talk to other landlords in your area, or to people who have investment property loans, and see if they have any suggestions for lenders. You can also check with your local Chamber of Commerce or business association. These organizations often have lists of recommended lenders for their members.
Apply for a Rental Property Loan
You can apply for a rental property loan online, in person, or by phone. If you’re applying online, you’ll need to provide some basic information about yourself and the property you’re interested in financing. Once you’ve submitted your application, a loan officer will contact you to discuss your options and help you choose the best loan for your needs.
Gather the required documents
Before you begin the application process for a rental property loan, it’s important to gather all of the required documentation. This will vary by lender, but generally, you will need:
-Your most recent tax return
-Your most recent pay stubs
-A list of all your assets and debts
-Proof of homeowners insurance
-An estimate of your monthly expenses
With all of this information in hand, you’ll be able to complete the rental property loan application quickly and easily.
Submit the loan application
The first step is to fill out a loan application. You will need to provide your personal information, financial information, and details about the property you are looking to purchase. Once you have submitted your application, a loan officer will review it and determine if you are eligible for a loan.
Wait for loan approval
The waiting game starts after you submit a loan application. How long it takes to get approve for a loan depends on the lender, your creditworthiness and, to some extent, luck.
It could take a few days or even a few weeks to get an initial loan decision from a large bank. If you’re granted a loan, it’ll probably take another week or two to get the money. But smaller community banks and credit unions may be able to move faster.
If you’re in a hurry, ask your lender how long the approval process will take and what you can do to speed it up.