Investment Property Loans Demystified

There truly is no mystery about obtaining investment property loans. These types of loans have the same eligibility standards as other installment loans requiring collateral. In order to qualify, you may wish to consider the following factors to help better your chances and make things more clear as you initiate the loan process.

Check Your Credit Report

Stay on top of your credit. Check your report and score often before you plan to finance anything. This way you can find errors and correct them before you apply for a loan. In fact, you may even want to apply for a loan pre-approval, to know what you qualify for in advance and make investment property shopping easier.

If you are hoping to improve your credit, consult with a mortgage industry expert or credit advisor before closing any accounts or paying any off. Sometimes what would seem to be a positive action on your part can end up hurting your score rather than enhancing it.

Find a Partner

If you can't procure credit via a traditional banking route, you might opt to find an investment partner who can help you with capital. Some business people have money to invest, but little time to search for good opportunities. This could prove to be a win/win opportunity for you both. Don't overlook the option of borrowing money from a private lender. The interest rate may be higher than borrowing from a bank or credit union, but if you are planning on selling the property in a short time for profit, you won't lose much due to the higher interest.

Be Honest


While some loans offer better rates to borrowers who are purchasing second homes or vacation homes versus investment properties, always be honest on your application. You can get into a lot of trouble if you fudge your intentions on the loan application simply to qualify for a better mortgage rate. Plain and simple, don't say you will live in a house if you have no intention to ever do so.

Shop Around


While many companies still require 10% down for the purchase of a first investment property, there are other companies that will finance 100% of the costs. Shop around and consult with your banker to find the best loan to suit your needs. There are creative ways to construct financing making it affordable. Some first time investment property loans end up with a first mortgage for 80% of the purchase price and a 10% home equity line of credit as well providing a total of 90% financing.

Sellers often can help out by contributing toward the closing costs which helps reduce the buyer's expenses. You also may be able to obtain a home equity loan or home equity line of credit against the existing equity in your primary residence to help come up with your investment property loan down payment.

Once you have found the perfect property, gather all the necessary paperwork together to help the process progress smoothly including:

  • proper forms of ID
  • paycheck stubs
  • at least two months of bank account statements and investment account statements
  • self-employment information
  • tax returns
  • necessary legal documents such as bankruptcy or divorce papers.
Consult with your accountant and real estate attorney to make sure you have everything in order and to be sure your rights are honored. Act confidently and swiftly and before you know it, you will be a landlord with a brand new investment property.

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