Rental Property Mortgage Guidelines On 1 To 4 Unit Homes

This BLOG On Rental Property Mortgage Guidelines On 1 To 4 Unit Homes Was PUBLISHED On January 13th, 2019

New rental property mortgage guidelines by Fannie Mae and Freddie Mac make financing on rental properties easier.

  • Gustan Cho Associates has launched non-QM loans for investment home financing
  • NON-QM Loans are alternative non-traditional loan programs that differ than conforming loans
  • More and more investors are seeking real estate as their investment of choice

After the 2008 Housing And Credit Meltdown, real estate is becoming more and more favorable investment vehicles for most investors.

Options With Rental Property Financing

Prior to now, Fannie Mae and Freddie Mac was the only investment property financing program available other than hard money loans. Gustan Cho Associates has launched many rental non-QM loan investment property loans for real estate investors.

Here are some considerations investors of rental properties need to take into consideration:

  • Rental Property Mortgage Guidelines differs depending on the loan program
  • Down Payment Requirements
  • Mortgage Rates are higher on investment properties versus owner occupant and second homes
  • Reserve requirements

Down Payment Rental Property Mortgage Guidelines

Rental Property Mortgage Guidelines on rental properties is much higher than the owner-occupant homes.

  • Credit, income, and debt to income ratios on recourse investment property mortgages are much stricter than owner occupant homes
  • Most lenders require 20% to 30% down payment on investment property loans
  • Investment homes are considered much riskier loans versus owner occupant loans by lenders
  • Therefore, lenders want borrowers with skin in the game

Large down payment by buyers is more skin in the game by borrowers.

Traditional Investment Home Mortgage Loans

Fannie Mae and Freddie Mac set investment property mortgage guidelines on conventional loans.

  • There are credit score, debt to income ratio, and down payment requirements set by Fannie Mae and Freddie Mac guidelines

Here are Fannie Mae and Freddie Mac Down Payment Rental Property Mortgage Guidelines:

  • Fannie Mae Standard Eligibility Requirements For Investment Mortgages are the following:
    • Purchase | Investment Property (Maximum LTV, CLTV, HCLTV)
      • 1 unit investment homes– 85% LTV or 15% down payment
      • 2-4 units investment home financing requires 75% LTV or 25% down payment
    • Cash-Out Refinance Mortgages| Investment Property Financing (Maximum LTV, CLTV, HCLTV)
      • 1 unit rental investment homes– 75% Loan To Value
      • 2-4 multi-family units investment property homes– 70% Loan To Value and/or 30% down payment
  • Freddie Mac Maximum LTV/TLTV/HTLTV Ratio Requirements for Investment Property Loans
    • Purchase Investment Homes | Investment Property (Maximum LTV, CLTV, HCLTV)
      • 1 unit investment properties – 85% LTV or 15% down payment
      • 2-4 multi-family investment homes – 75% Loan To Value or 25% down payment
  • Cash-Out Refinance | Investment Property (Maximum LTV, CLTV, HCLTV)
    • 1 unit investment homes – 75% Loan To Value
    • 2-4 multi-family unit – 70% Loan To Value

Non-QM Rental Property Mortgage Guidelines

Gustan Cho Associates are experts in originating and funding non-QM investment property loans:

  • 20% to 30% down payment
  • Investment loan programs are available for real estate investors
  • We can use property cash flow analysis 
    • The property qualifies based off of debt-service coverage
    • This is calculated by dividing PITIA (principal, interest, taxes, insurance, and association dues) by rent
    • No personal debt-to-income ratios required for non-traditional investment property loans

Gustan Cho Associates also offers bank statement loans for self-employed borrowers. No federal income taxes are required. Income is qualified by average monthly bank statement deposits. Withdrawals do not matter. Gustan Cho Associates is a very aggressive lender where we do not just close loans but close them on time.

Qualifying Factors For Investment Mortgage Loans

Every case scenario can be different with alternative financing:

  • Down payment requirements vary
  • Minimum down payment on investment property loans is normally 20%
  • Mortgage Rates varies and Loan Level Pricing Adjustments are a factor in depending on the following:
  • Borrowers Credit Scores
  • Type of property
  • Number of units/occupancy type
  • Debt to income ratios
  • Loan to value
  • Reserves of acceptable sources of reserves are checking, savings accounts, bonds, mutual funds, certificates of deposits, money market, trust account, stocks, bonds, retirement account, and cash value of life insurance policy

Contact Gustan Cho Associates Mortgage Group at 262-716-8151 or text us for faster response to learn more on Rental Property Mortgage Guidelines. Or email us at [email protected]

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