Buying an investment property that you can rent out to others or resell at a higher value can be an excellent source of additional income. Investor loans, (also known as investment property loans), can help provide borrowers with the necessary financing to invest in a property and make a profit. If you are interested in exploring your investment opportunities in Kansas City, Missouri, and have questions about your financing options, KC Investor Funding can help. Read on to learn more about financing a property using investor loans.
How Do Investor Loans Work?
Investor loans are intended to help borrowers who are planning to purchase a home with the intention of reselling it or fixing it up and then flipping it for a financial gain. There are several types of investor loans, including conventional investment property mortgages, FHA or VA multi-unit financing loans, hard money loans, etc. Investment properties typically can be used to purchase multi-unit properties, condos, or houses, but the property may not be used as the borrower’s primary residence, (however, in some cases, it may be possible for a borrower to live on site if it is a multi-unit property).
Due to the fact that an investor often is responsible for a mortgage for their primary home in addition to their investment property, and that some investments may not always be a success, investor loans are considered a higher risk for lenders. Therefore, investor loans tend to have strict eligibility requirements, they usually require a higher down payment, and they have higher interest rates. Investor loans offer many benefits to a borrower because in addition to helping them earn extra money, there are certain tax benefits that can be available to an investor.
How Can You Qualify for an Investor Loan?
The typical eligibility requirements for an investor loan include:
- A decent credit score – The higher your credit score, the better rates and terms you will be able to obtain.
- A down payment – A down payment of 20% will likely be required in order to offset the risk of foreclosure if a borrower defaults.
- Additional cash reserves – An amount of six months worth of savings is ideal in order to make repairs and maintain the property.
- A Low DTI (debt-to-income) ratio – A DTI of 50 percent or lower is desired by lenders to ensure that you are able to afford monthly mortgage payments.
Get Help Applying For an Investor Loan
Investing in a property to resell or rent out is a great way to have your money work for you and generate some supplemental income. If you are interested in purchasing an investment property in Kansas City, Missouri, and want to learn more about your financing options, contact KC Investor Funding today for a consultation.