Investment Home Loans Lending Guidelines For Investors
This Article Is About Investment Home Loans Lending Guidelines For Investors
The housing market is booming. There is a major shortage of homes in the United States. There is more demand than an inventory of homes. Home prices are skyrocketing with no sign of a housing correction in the near future. Investors are turning to invest in real estate. There are various types of investors. Some investors will purchase a property and do a fix and flip for a quick buck. Others will purchase a property, renovate it, and rent it for rental income. Mortgage companies have launched dozens of non-QM loans for real estate investors. With historic low mortgage rates and demand for housing, many investors are getting into real estate investment.
Investment Home Loans Explained
Investment home loans are mortgage loans for those homeowners who already have a primary residence and possibly a second home.
There are two types of investment home loans.
- Fannie Mae and Freddie Mac Conventional Investment Home Loans
- No Doc Investment Property Loans where only the property is underwritten and no tax returns are needed by borrowers
Conventional Investment Mortgages
Fannie Mae and/or Freddie Mac offer conventional conforming investment property mortgages. Mortgage borrowers need to meet Fannie/Freddie Mortgage Guidelines. If a homeowner already owns a home and wants to purchase a second home, he or she can get a second home or vacation home loan. A second/vacation home loan mortgage rates are comparable to first home mortgage rates. A 10% down payment is required on second home loans. However, on investment loans, Conventional mortgage rates are about 0.50% higher than first home or second/vacation home mortgage rates.
Second Home Financing
Fannie and Freddie have strict mortgage guidelines when it comes to second home financing. Those who are interested in purchasing a second/vacation home that is nearby their primary owner-occupied home need to meet certain requirements. Although it is only a second home or vacation home, lenders will consider it as an investment home due to the closeness from the primary residence. For it to be considered a second/vacation home, the home needs to be at least 60 miles or more from the primary residence. If it is close to the primary home, it needs to be waterfront or have some unique features to be classified as a second home. Homebuyers of second homes need to justify to the underwriter why it is a second home and not an investment property.
Down Payment Requirement On Investment Property Loans
Minimum down payment for investment home purchase:
- The minimum down payment for investment home loans are 20%
- With a 20% down payment, the home buyer will qualify for an investment loan
Conforming investment home loans are conventional loans and fall within Fannie Mae underwriting guidelines.
Full Doc Investment Property Mortgages
Homebuyers who have a higher debt to income ratio might not qualify for another property such as an investment home if they cannot use the potential investment home income to offset your high debt to income ratio. The good news is that investment homebuyers can use 75% of the potential gross monthly rental income. Potential rental income can only be used if and only if you put a 25% down payment. Lenders will allow 75% of the monthly gross rental income to be used for investment home loans but again, it depends on each lender.
Qualifying For No-Doc Investment Home Loans
Gustan Cho Associates Mortgage Group are experts in no-doc investment loan programs:
- No doc investment loan program is where income tax verification is not required
- The loan is solely underwritten based on the cash flow of the subject property
- The no doc investment loan program is underwritten based on the debt coverage ratio
- The borrowers credit scores matter but are not based on the individual debt to income ratio
- Unlike Fannie Mae’s 5 to 10 Financed Properties Guidelines, there is no maximum amount of financed property requirements
- No Doc Investment Property Loans, the property is underwritten
- No Doc Investment Property Loans can be financed directly to an LLC or borrower
If you have questions on investment home loans or no-doc investment property loans, please contact us at Gustan Cho Associates at 262-716-8151 or text us for a faster response. Or email us at [email protected] You can also subscribe to our daily mortgage and real estate newsletter at www.gustancho.com .