Banks such as Quicken Loans and Wells Fargo offer mortgage loans for investment rental properties, explains each company’s website. However, mortgages for investment properties usually require larger down payments, require different appraisal requirements and carry higher interest rates, explains Wells Fargo.Continue Reading
Consumers that apply for mortgages on investment properties can expect to pay 20 percent down to secure the loan, states Bankrate. Mortgage insurance does not cover investment properties as of 2015, which is why banks require large down payments. Bankrate recommends that consumers should consider placing 25 percent down on any investment property financing to secure lower interest rates. Bankrate also recommends that borrowers maintain credit scores of 740 or higher in order to avoid additional costs on investment property financing.
Consumers who wish to use future rental income from the investment property to qualify for financing must show a minimum of two years’ experience in property management, cites Wells Fargo. Potential borrowers must also provide the necessary funds to close the transaction since banks do not offer financing for down payments or closing costs on investment properties. Banks often restrict the type of properties eligible for investment financing. Manufactured homes, time-shares and co-ops are examples of properties that banks disqualify for investment financing.Learn more about Credit & Lending