What is the difference between getting financing for a rental property versus a mortgage for a primary residence?
Obtaining financing on a rental property can be a little more cumbersome than on a primary residence. First of all, not all lenders will finance investment property—you may have to do some homework. Secondly, many lenders use only adjustable program types on rental properties, as opposed to allowing fixed rates. They may also be unwilling to finance them for longer than 15-20 years, as opposed to the more standard 30-year mortgage. If they will allow fixed rate financing, they may charge a higher rate than the one offered for owner-occupied dwellings. Lastly, the documentation and down payment requirements may be more substantial. It’s pretty standard to require a minimum of 20 percent down. Copies of your tax returns, as well as copies of any leases that are in place, will be required, because lenders will want to analyze the cash flow of the investment property.
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