Rental Property Financing
We can finance all types of existing rental real estate. In most cases the properties need to be rented and profitable to get long-term inexpensive financing. Other programs are available for properties needing renovation 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
- 2-4 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).
We have access to a special program in the Dayton area that allows local investors to refinance in under 12 months based on the appraised value, and potentially pull their cash invested in the property out (but no extra).
Loan-to-Value: 70-80%. Budget 70%, although 75% is common. Higher LTVs are available based on property performance and borrower strength.
FICO: 620 or better. 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.
Loan Structure: 5/5 ARM, 20 year amortization, 20 year term, no balloon. This is the most common, but it can vary.
Interest Rates: 5% 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: 1-3 pts, most often 1 1/2.
Commitment Fee: $499 once we have an approved lender
Junk Fees: None; legit 3rd party fees charged at cost, no mark-ups
Personal DTI: Is considered, 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 Interst 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.