Everything You Need to Know About Getting a Loan for an Investment Property

Getting an investment property loan doesn’t have to be pure nightmare fuel.

You’ve heard the nightmare stories about trying to get an investment property loan: speaking to dozens of money lenders, jumping through hoops, racing against the clock to get all of your paperwork in, then waiting months only to hear that you’ve been rejected. Yeah…it’s a real-life nightmare that will haunt your dreams.

That being said…it doesn’t have to be.

Rental property loans (or investment property loans or fix & flip loans) can be involved and a little unwieldy, but that doesn’t mean they are an impossible maze that you can never find your way out of. You just have to have the right info beforehand and know the right people (and we don’t mean in a Sopranos kind of way, we mean in The Loan Guys kind of way) and, once you have those, getting a loan for an investment property becomes much more manageable and, dare we say, sorta easy?

So, let’s roll up our sleeves and dig into it. Here’s everything you need to know about getting a loan for an investment property:  

First things first, let’s answer the question, “What is an investment property loan?” Oh, we are SO glad you asked. (You did ask, didn’t you?) An investment property loan is money you borrow to buy or build a property that has the potential to produce income for you by leasing the space out to a tenant, or by re-selling it after you increase its value. Real estate isa great way to generate a passive income stream that can help you from now until retirement, not to mention that that the rental property diversifies your investment portfolio and creates an asset that grows in value over time.

The good news is that rather than a conventional loan where money lenders pour over your tax information, an investment property loan is approved based on the value of the investment property or the rental income of the property. The approval process of investment property loans tends to be a little quicker as well, which is perfect if you’ve found the ideal investment property and wanna jump on it quick.

Now, an investment property loan has slightly different parameters than a home mortgage loan — it’s not “one size fits all,” ya know? With an investment property loan, you typically have more of a down payment to make, as well as higher interested rates attached to the loan. Why’s that? Well, when it comes to approving a mortgage on an investment property, lenders are a little more stringent in their requirements. Because the owner will not be occupying the property, potentially transient occupants may adversely impact the property’s value, making the risk for the lender much greater, hence, the bigger down payment and higher interest rates.

All of this means that when you are finally ready to apply for an investment property loan, you’ll want to be prepared. The better you look (on paper, we mean…you’re beautiful IRL), the better your chances are for getting approved. This means…

*Knowing your spending limits

Before you even begin the investment property loan process, you gotta figure out how much you can actually spend. You may have found the perfect investment property, but if it’s above your pay grade (so to speak), then you’re going to need to reassess and pull back until you find that property that fits your budget.

*Being as debt-free as you possibly can

Pay off as much outstanding debt as possibly before going into the investment loan process.

*Raising your credit score

640 or higher is the way to go.

*Making sure you’ve got cash

You’ll want to make sure you have enough for the down payment as well as a six-month cash reserve of mortgage payments.

*Getting that paperwork in order

This one’s kinda self-explanatory, right?

Now, one of the most important decisions (well, the most important decision in our humble opinion) when looking to get an investment property loan is finding the right money lender. You’ll want to find someone who is willing to work with you and your specific needs and who can explain each step in the investment property loan process in a clear and relatable way.

That’s where The Loan Guys come in. The Loan Guys have an investment property loan program that makes it easy for real estate investors to acquire their rental property quickly… like, super quick…like, 12-14 days quick. They also offer…

*Up to 80% Loan-to-value on single-family residence, 2-4 units, condos, and townhomes.

*Purchase, refinance, or cash out options available.

*Minimum credit score of 640+ for 1-4 units and condos.

*Loan term 30 years fixed/fully amortized.

*Hybrid ARM options available, 5/1, 7/1, 10/1 Amortized over 30 years.

*10-year interest only option!

*20% down payment required.

*Blanket Loans available.

*NO income verification required.

*NO DSCR option available!

See? Getting an investment property loan doesn’t have to be the horrific nightmare everyone tells you it is. You just have to be prepared and have to have a game plan that you are comfortable with and that you know will lead to financial success. Well, that and a reliable money lender like The Loan Guys who are only too happy to walk you through their entire investment property loan process.

Honestly, it’s their idea of a good time.