How to Get a Loan for a Rental Property
Owning a rental property has many good sides, especially when market is volatile and stocks are taking a tumble. Generating a steady passive income stream by becoming a landlord is a good idea, although you need a huge amount of money to begin. If you have a huge bankroll, you only have to make a clever decision on a property you’ll buy; but if you don’t have enough cash to invest it in a rental property, you might consider real estate loans for rental properties, conventional or private financing. Here are some tips on financing rental properties we would gladly share with you.
Mortgage insurance policies don’t cover rental properties, so it’s necessary to have at least 20% down if you want to get traditional financing for them. Of course, the more you can put down, the better interest rate you’ll get. In case you don’t have enough money, you could obtain a second mortgage on the property, although it would likely become a difficult battle.
Before attempting any deal, it’s recommended to check your credit score, because it can have the major impact on terms of a loan on a rental property. If your score is below 740, there’s a chance you’ll need to pay a fee to keep the same interest rate. In case you don’t do it, your interest rate is going to be higher.
It’s probably the best to avoid nationwide financial institutions and to choose a local bank for financing your rental property, especially if your down payment’s not big enough. Neighborhood banks tend to be more flexible and their focus is on local investments. Also, you could opt for mortgage brokers since they know the market and have access to various loan products. Before making a final decision, do some research on both local banks and mortgage brokers.
Finally, there are some peer-to-peer lending websites and clubs, so you might even get a loan from an individual, private lender. If you’ve found the right rental property that will bring you a steady income in years to come, you’ll surely find the way to finance it.