One of the biggest steps in any investor’s journey is buying their first rental property. It can be a great way to start building a passive income.
Before you start building a successful real estate empire, it’s important that you first learn about what’s needed to invest in a property. Having the proper knowledge about finding a house and finding the right tenants are some of the most important factors that will help you make a successful investment.
In this article, we’ll talk about the various steps that will be required to purchase your first rental property. We’ll also cover the challenges that you’ll likely encounter along the way. While buying a home is similar to buying a rental property, there are some differences. These tips and tricks will help make the process easier.
Getting a mortgage for your investment property
When it comes to buying a property, one of the biggest questions that people ask is how much they can afford. Before you start the process, you must have a good understanding of the various factors that affect the price of a property. One of the most important factors that you should consider is the type of investment property that you’re interested in. Unlike a primary residence, investment property has different rules.
Getting pre-approved for a mortgage is one of the most important steps that a home buyer should take. If you’re not pre-approved before the deal closes, you might end up with a property that’s already under contract with a different buyer. Having the necessary pre-approval will allow you to make an immediate move and get a great deal.
Getting pre-approved for a mortgage is one of the most important steps that a home buyer should take. Before you start looking for a house, you must have the necessary information to make an informed decision. Having the necessary pre-approval will allow you to make an immediate move and get a great deal.
Get an agency loan
An agency loan is typically used for investing in property. Most likely, you will not be getting a government-backed loan for your property. Instead, you’ll most likely be using an agency loan, such as Fannie Mae or Freddie Mac. However, if you’re planning on purchasing a multi-unit property, living in one, and leasing the others, you might be able to get government backing. As always, talk to your Home Loan Expert to see what the steps are there.
What credit score do you need?
If you’re planning on investing in property, you’ll need a credit score of at least 620 to qualify for a mortgage with a 20% down payment. However, if you have a credit score of 720 or higher, you only need to put down 15%.
If you’re looking at an adjustable rate mortgage, your credit score should be at least 620 for at least a 15% down in the case of single-family investment properties
While the down payment is required for a rental property, other requirements are similar to those for a home purchase. For instance, you’ll need to provide two years of tax returns, two years of W-2s, and two years of bank statements. Your assets should be verified as well.
Your mortgage company will also require that you have six months of reserve money in case something unexpected happens. Having this amount will allow you to give some wiggle room.