When seeking a rental property loan, whether conventional or unconventional, certain requirements apply. Here are the key factors to consider:
Credit Score and History:
Your credit history and credit score significantly impact your eligibility for a rental property loan.
A positive payment history demonstrates creditworthiness.
Lenders use your credit score to determine interest rates and fees.
Generally, major late payments or derogatory marks within a 2-year period may disqualify you.
Debt-to-Income Ratio (DTI):
Most loans, excluding DSCR (Debt Service Coverage Ratio) loans, rely on your monthly debt relative to your income.
Your DTI determines the number of properties you can qualify for.
Lenders often accept a DTI ratio of 45-50%.
Assets and Reserves:
Beyond the down payment, you’ll need additional funds for reserves.
Reserve requirements vary based on the loan type and the number of existing properties.
Typically, reserves amount to 6 months of monthly payments per property or up to 6% of aggregate loan balances for investors with over 6 financed properties.
Comments