Using Rental Income With Investment Home Purchase
Investment home mortgage loans are conventional mortgage loans and conventional mortgage lending guidelines apply. We will cover several typical investment home mortgage case scenarios on this blog.
Minimum Down Payment On Investment Home Purchase
The minimum down payment required for an investment home mortgage loan is 15% down payment. With a 15% down payment investment home mortgage loan, mortgage insurance will be required. To avoid having to pay private mortgage insurance, a minimum of a 20% down payment is required. Investment homes can be a one to four unit property. Many investment home mortgage loan borrowers want to know whether they can use potential rental income from the investment home purchase if the subject purchase property is vacant. The answer is yes. You can use the potential rental income of the investment home subject property to qualify for your investment home mortgage loan.
Can Rental Income Be Used With Investment Home Purchase?
If you are purchasing an investment home and you need the investment home rental income to qualify for the investment home mortgage loan and the property is vacant, an investment home appraisal will be ordered. The appraiser will research comparable rental income nearby your intended investment home purchase and will come up with a rental income market value. The full market value rental income is not used. Only 75% of the market rental income will be used as additional income to qualify for your investment home mortgage loan. Some mortgage lenders will go up to 85% of the market rental income for mortgage qualification purposes.
Owner Occupied Home To Investment Home
Many homeowners who currently own an owner occupied residence and intend on purchasing another owner occupied residence wonder if they can rent out their current owner occupied residence and use it as an investment home. You can do this, no problem, but you need to qualify for both mortgages: The current owner occupied home and the new owner occupied home. Many folks cannot qualify for both mortgages and need to get the rental income of the first owner occupied home in order to qualify for the new owner occupied home purchase. In order to do this and be able to use the potential rental income of their first owner occupied home, they must have at least 25% equity in their home. A refinance is not necessary. The mortgage lender will order an appraisal of the first owner occupied home and see what value the appraisal come in at. The borrower then needs to pay down the equity so the loan to value is at least 75% LTV. The appraiser will come up with a market rental income rate and 75% of that market rental income rate can be used to qualify for the mortgage loan borrower’s debt to income ratio.