Investment Home Loans For Real Estate Investors

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In this blog, we will cover investment home loans for real estate investors. The housing and real estate market is booming. Many investors are turning to invest in real estate. Real estate investors are investing in single-family homes as rentals, as flips, and many investors are into fix and flips. The team at Gustan Cho Associates are experts in helping real estate investors with the hundreds of investment home loans we have available through our 190 wholesale mortgage lenders.

What Type of Investor Loans Is Best For Investment Property?

The housing market is booming. There is a major shortage of homes in the United States. There is more demand than an inventory of homes.

Home prices are skyrocketing with no sign of a housing correction in the near future. Investors are turning to invest in real estate.

Types of Investment Home Loans For Real Estate Investors

There are various types of investors. Some investors will purchase a property and do a fix and flip for a quick buck. Others will purchase a property, renovate it, and rent it for rental income. Mortgage companies have launched dozens of non-QM loans for real estate investors. With historic low mortgage rates and demand for housing, many investors are getting into real estate investment.

Investment Home Loans Explained

Investment home loans are mortgage loans for those homeowners who already have a primary residence and possibly a second home. There are two types of investment home loans.

1. Fannie Mae and Freddie Mac Conventional Investment Home Loans
2. No Doc Investment Property Loans where only the property is underwritten and no tax returns are needed by borrowers

Conventional Investment Mortgages

Fannie Mae and/or Freddie Mac offer conventional conforming investment property mortgages. Mortgage borrowers need to meet Fannie/Freddie Mortgage Guidelines. If a homeowner already owns a home and wants to purchase a second home, he or she can get a second home or vacation home loan.

Mortgage Rates on Second Home Versus Primary Home Loans

A second/vacation home loan mortgage rates are comparable to first home mortgage rates. A 10% down payment is required on second home loans. However, on investment loans, Conventional mortgage rates are about 0.50% higher than first-home or second/vacation home mortgage rates.

Second Home Financing

Fannie and Freddie have strict mortgage guidelines when it comes to second home financing. Those who are interested in purchasing a second/vacation home that is nearby their primary owner-occupied home need to meet certain requirements. Although it is only a second home or vacation home, lenders will consider it as an investment home due to the closeness of the primary residence.

Difference Between Primary Versus Second Home Mortgage Loans

For it to be considered a second/vacation home, the home needs to be at least 60 miles or more from the primary residence. If it is close to the primary home, it needs to be waterfront or have some unique features to be classified as a second home. Homebuyers of second homes need to justify to the underwriter why it is a second home and not an investment property.

Down Payment Requirement on Investment Property Loans

Minimum down payment for investment home purchase: 

• The minimum down payment for investment home loans is 20%
• With a 20% down payment, the home buyer will qualify for an investment loan

Conforming investment home loans are conventional loans and fall within Fannie Mae’s underwriting guidelines.

Full Doc Investment Property Mortgages

Homebuyers who have a higher debt-to-income ratio might not qualify for another property such as an investment home if they cannot use the potential investment home income to offset their high debt-to-income ratio. The good news is that investment homebuyers can use 75% of the potential gross monthly rental income.

What Is a Real Estate Property Mortgage Loan?

Potential rental income can only be used if and only if you put in a 25% down payment.