Q: I keep hearing about 95 percent or 100 percent investment property loans being available. I cannot seem to find a bank out there offering this type of loan. Is the only way to get this type of loan to use a mortgage broker? I would rather deal directly with a bank than have to go through a 3rd party.
A: Generally it’s harder to obtain a mortgage for an investment property than for your own personal residence. And if you want to put no money down, it can be extremely hard to get financing.
Many lenders will require you to put down at least 30 percent of the price for the property. Some are more lenient and will allow you to put down just 20 percent. In certain circumstances, some lenders will allow 100 percent financing, but only if the property was purchased at below market pricing and the lender is sure that upon resale the property has appreciated substantially in value.
You should check with some real estate attorneys or brokers in your area or mortgage brokers that specialize in investment properties. Any of these individuals should know of some reputable lenders for investment properties.
Finally, if the property you are buying is a four unit building or less and you will make one of the units your home, you can get a conventional owner-occupied loan from almost any lender. These loans, unlike loans for properties that are purely investments, are bought by Fannie Mae and Freddie Mac on the secondary loan market.
July 15, 2005
UPDATE ON 100 PERCENT INVESTMENT PROPERTY LOANS
September 23, 2010
Since the mortgage and real estate meltdown occurred, investment property loans have become increasingly difficult, if not impossible, to obtain. There are still some lenders out there that will give borrowers loans on investment properties. If those investment properties are residential properties, you may have better luck. However, for strip centers, larger apartment buildings and other real estate, lending has all but dried up, particularly if you want a high loan to value loan or a 100 percent loan. High loan to value loans are almost impossible to get.
Most lenders today will require at least 25% down or equity of up to 25% in the property to refinance a property. And, if you are buying a property, you might expect a lender to require that same 25% or more. In the boom years of real estate, some real estate lenders had unique ways to value investment properties and even were willing to allow borrowers to stretch the method of computing income from the properties. These days lenders have become quite conservative and will make it difficult for a borrower to use certain sources of income to receive additional money from a lender.
If you are looking to invest in real estate during these depressed real estate market days, you’ll need to make sure you have enough money to put down for the property and you might wish for the days when you were able to get 100 percent financing on an investment property loan, but getting a loan at all these days for an investment property is the goal today.