If you already own a primary residence, chances are you probably are familiar with conventional financing. A conventional mortgage conforms to guidelines set by Fannie Mae or Freddie Mac; unlike an FHA, VA, or USDA loan, however, it's not backed by the federal government. With conventional financing, the typical expectation for a down payment is going to be 25% of the purchase price for an investment property.
• LTV – Typically, for a 1-unit, investment property purchase, a 25% down payment is required (an LTV of 75%).
• Credit Score – The minimum credit score needed is at least a 620.
• Income – The required income varies depending on the amount of the house payment and other debt. The total debt-to-income ratio (including the house payment) generally cannot exceed 45%.
Frequently Asked Questions:Is it true that I must have two years of landlord experience? What if this is my first time?
If you have never owned a rental home before we may be able to use either 75% of the projected rental income as documented in a lease agreement or 75% of the monthly market rent as notated in the appraisal of the property to be financed.
Are gift funds allowed?
Unfortunately, no gifted funds are allowed. The minimum 25% down payment for an investment property must be 100% from the borrower’s own money.
How much is needed in reserves?
We require most borrowers to show six months worth of principal, interest, taxes, insurance and homeowners association dues. If the borrower has multiple financed properties the reserve requirement may increase.
Summary: Contact a mortgage specialist with CBM Mortgage today to learn more about these exciting loan options and to find out which is best for you and your family!