Investing in real estate can be a very lucrative business venture. If you are interested in buying a property for the purposes of renting it out or reselling it for a profit, and are an investor or someone with an untraditional source of income, you might want to consider financing the home with an investor loan. The loan specialists at Foundation Mortgage can help you learn about the advantages of using investor loans to purchase homes in the areas of Knoxville, Maryville, Lenoir City, Oak Ridge, and Gatlinburg, Tennessee. Contact us today for a consultation.
What Are Investor Loans?
Investor loans, (also sometimes called investment property loans), can help a buyer that intends to fix and flip a home and then subsequently sell it or intends to rent out the home for a profit purchase a property. There are several types of investor loans available, such as hard money loans, conventional investor loans, FHA or VA multi-unit financing, etc. Generally, investment loans are used to buy multi-unit properties, condominiums, or houses. It is important to note that the property cannot be the buyer’s main residence, however, if it is a multi-unit residence, it may be possible for the borrower to live in a unit.
Since the investment sometimes may not always be successful, and because the borrower may already be obligated to pay a mortgage on their primary residence, investor loans are considered a high risk to lenders. Therefore, investor loans tend to have stricter qualifying requirements, may require a higher down payment, and have higher interest rates. Despite these factors, investor loans offer a borrower many benefits, including providing a supplemental source of monthly income and tax benefits.
Investor Loan Qualifications
The typical eligibility requirements for securing an investor loan include:
- A high credit score – A credit score of 720 or above is typically required for an investor loan. The higher your credit score, the better your interest rates and loan terms will be.
- A down payment – a 20% down payment will be required in order to offset the risk of foreclosure if monthly mortgage payments cannot be made
- Cash reserves – Ideally, a six-month cash reserve amount will be desired in order to make necessary repairs and upkeep the property.
- Debt-to-income ratio, (DTI) – A debt-to-income ratio of 50 percent or lower is desired to ensure that you can afford the monthly mortgage payments.
Guidance for Investor Loans
Investing in a property in order to sell it or rent it out to others can be an excellent way to supplement your income. If you are interested in purchasing an investment property with an investor loan in the areas of Knoxville, Maryville, Lenoir City, Oak Ridge, or Gatlinburg, Tennessee, contact the loan specialists at Foundation Mortgage. We can work closely to help determine your eligibility and guide you through the loan application process.