The Lowest Rates for Rental Property Financing
A commercial, full documentation loan has the lowest available loan rates, and it has the highest qualifications. For those of you looking for the best rates, and willing to do the paperwork, this commercial loan is the lowest cost rental loan available to experienced investors with multiple mortgages.
There is no limit to the number of mortgages an entity or individual may have.
You can use this loan type to finance all kinds of rental real estate including single family homes. In general, the properties need to be rented and profitable to get this financing. Hard Money Loans are available for properties needing renovations or increased occupancy.
Here are the general requirements. Remember, this is general list. Every property and borrower is different. Even if it’s not listed here, there may still be financing options for you.
- Single Family Properties
- 1-4 Unit Properties
Seasoning: 12 months will allow you to use your full appraised value. Financing is available for ownership under 12 months. (Purchase + Rehab cost is treated as the property value).
Loan-to-Value: 75-80%. Budget 75%, although 80% is common. LTVs are based on property performance and borrower strength. They could be lower if cashflow is low.
FICO: 640 or better, sometimes down to 620. A 680+ will get you the best rates and terms. Websites providing credit scores may not be providing a FICO score. I like www.CreditKarma.com, but it’s not FICO. CreditCheckTotal.com is one site you can use to get your actual FICO score for a few dollars. MyFico.com is my preferred site, however it is better for someone who wants to track their FICO over time.
Loan Structure: These are the the most common, but there are some variations available.
- 5/1 ARM (5 year fixed, then adjusts annually), 20 year term, no balloon
- 5 year fixed, 25 year amortization, 5 year balloon.
Interest Rates: 4.99% or so currently. It will vary based on LTV, FICO and other factors.
Loan Amount: No maximum, $50,000 minimum. Sometimes, with exceptions, we can get down to 30,000 per property on a blanket loan.
Prepayment Penalty: sometimes 3-5 years, sometimes none
Lender Origination Points: 2-4 pts.
Junk Fees: None; 3rd party fees charged at cost, no mark-ups
Personal DTI: Is a factor, but there is no hard and fast requirement
Property DSCR*: 1.2 minimum, more is better.
Rental Experience: Helpful, but not required
Closing: 45-60 days from completed application and all documents submitted.
Bankruptcies: None in past 2 years, and 5 years is better
Foreclosures: None in past 2 years
States: 40+ states
The Fine Print: Loan approval is subject to program guidelines. Interest rate and terms are subject to change. Final terms vary depending on the property and borrowing entity.
*Debt Service Coverage Ratio: Net Operating Income after reserves divided by Principle and Interest payment.
Does my property need to be in my personal name? NO! Actually we prefer to see it in a business name, and sometimes we can accommodate a property titled in a trust.