Ins and Outs of Rental Property Loans

Yellow rental propertyLike many Americans, you’ve likely been through a couple of peaks and valleys in the stock market over the years. You’ve also seen real estate values fall dramtically in many parts of the country making investing in rental properties seem like a realistic possibility for the first time in years. While down payment requirements and underwriting guidelines for rentals have certainly become more conservative, there are plenty of mortgage companies out there who are ready to assist you in owning investment properties (including most of the lenders and brokers featured in the survey on ForTheBestRate.com).

Check Today’s Mortgage Rates

Some Frequently Asked Questions Regarding Rental Property Financing

Are Rates Higher for Rental Properties?

Yes, home mortgage rates for a rental properties are usually slightly higher (maybe .375% to 1% more in some cases) as mortgage companies look at rentals as carrying a higher degree of risk, Why? Because home owners tend to be more willing to default and/or walk away from their rental properties prior to doing so for their primary residences.

Are Rates Worse for Multi-Family Homes?

The can be. Many lender have additional pricing adjustments as the number of units increase.

Are Loan Costs More Expensive for Rental Properties?

In addition higher interest rates, investors also are faced with higher loan related costs. For example the cost of a real estate appraisal is typically higher as an appraisal will have to factor in rental income.

 What types of Homes Can Typically Be Financed

Most residential lenders will lend in 1-4 unit rental properties. Buildings exceed 4 units is typically considered commercial.

How Many Rental Properties Can Someone Finance at the Same Time

Fannie Mae and Freddie Mac have set limits (subject to change – ask your mortgage professional for current guidelines). However, borrowers may be able to find private hard money lenders who do not care (their rates might be higher though).

What Types of Loans are Available for Rental Properties

Borrowers can likely find conventional fixed rate (30, 20, 15, & 10 year loans are the most common) and adjustable rate financing solutions. For higher loan amounts, borrower’s will need to find lenders offering jumbo loans.

Request Information & Current Mortgage Rates from Competing Lenders and Brokers

Use the rate surveys on ForTheBestRate.com to compare mortgage rates from the competing mortgage companies. Then reach out to the various lenders and brokers to request rates and closing costs for your rental property loans.

Most of the mortgage companies listed in the rate survey on ForTheBestRate.com offer financing assistance for 1-4 unit rental properties in their given markets. Please note that the mortgage rates displayed are for primary residences. You’ll have to speak with various companies for their mortgage rates for rental homes. Mortgage rates for rental properties will be higher than what as displayed in the survey as lenders typically have pricing adjustments for non owner occupied homes.