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Mortgages for investment and rental properties

Understand which loan types can finance alternate homes

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Mortgages for investment and rental properties

An investment or rental property may be a good option for people who are looking to make additional income. This extra money could be made by renting space on the property, or by making improvements to a house and reselling it for a higher value. Regardless of your intent, it is often easier to fund this decision with a mortgage.

How do I get a mortgage for an investment or rental property?

The first point to consider when looking for a mortgage for an investment property is whether it will be your primary residence. If you plan on living in a house while renovating it or if you plan on buying a multi-family home and living in one unit while renting the rest of the space, you have more mortgage choices.

If you will not be living in the property you buy, you will have additional qualifications to meet as non-primary residences are considered riskier investments for lenders. This is because the primary tenant (if there is one) is not the borrower.

Can you use a VA or FHA loan for an investment or rental property?

If the home you buy will not be your primary residence, you will not qualify for a VA or FHA loan. The Department of Veterans Affairs and the Federal Housing Administration (who back VA and FHA loans respectively) require that these loans only be used for primary residences.

It may be possible for you to purchase a property with up to four units with an FHA loan, if you occupy one of the units as your residence. Learn more about FHA loans for investment properties.

Conventional loans for investment and rental properties

Whether the home you are looking to purchase will or will not be your primary residence, you may still qualify for a conventional or jumbo loan. Conventional loans are offered by private lenders without a government guarantee. They can have higher credit and financial requirements than VA and FHA loans.

Conventional loans also have limits on the amount of money you can borrow. The 2021 conforming loan limit is $548,250 in most parts of the United States. If you are looking to finance an investment or rental property for less than this amount, a conventional mortgage may be a good fit. Conventional loan limits can fluctuate each year and the loan limit is often higher in more expensive areas of the country like New York City and California.

Jumbo loans for investment and rental properties

Jumbo loans are basically conventional mortgages for amounts greater than the conventional loan limits. You may also know them as non-conforming mortgages. If you’re looking to finance an investment or rental property for more than $548,250, you will likely need to apply for a jumbo loan. Jumbo loans have stricter requirements because the loan amount is larger. Many lenders want a higher credit score and lower debt-to-income ratio standards.

Rental and investment property loan requirements

The loan application process for rental and investment properties is a lot like applying for a primary home loan. It is still a good idea to get the home inspected and it will likely still need to be appraised. You should expect to provide your financial history, proof of income, and submit to a credit check. You will also still need to pay closing costs.

Can I get an investment property loan with a low down payment?

You may still be eligible for a loan for an investment or rental property with a lower down payment. Keep in mind that the size of your down payment may affect other costs.

Talk to us about mortgages for investment and rental properties

Freedom Mortgage can help you buy an investment property with a conventional loan. Learn more about your mortgage options today. Call us at 877-220-5533 or Get Started online.

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Get started today by getting a personalized evaluation of your home loan options from Freedom Mortgage.

877-220-5533